- EUR/USD attracts some offers about 1,1300 while the US dollar faces low pressure after a two -day recovery.
- Washington has shown opening to reach a commercial agreement with China.
- ECB Nagel warns that the German economy could enter a slight recession.
EUR/USD finds support about 1,1300 during Thursday’s European negotiation hours after a two -day correction. The main currency pair of terrain proof while the US dollar (USD) faces pressure when trying to extend its recent recovery. The dollar index (DXY), which follows the value of the dollar against six main currencies, struggles to break over the immediate maximum around 100.00.
Despite Thursday’s slight losses, financial market participants seem to be valuing an additional recovery in the American dollar in the short term amid the increasing hope of a unwritten in the commercial war between the United States (USA) and China. Washington has shown willingness to sit at the table with Beijing, but this cannot advance without a reduction in critically high tariff rates.
Currently, US has imposed additional 145% tariffs on Chinese products, including a 20% tax on fentanyl, and Beijing has increased tariffs by 125% to US imports. “None of the parties believes that these are sustainable levels,” said US Treasury Secretary Scott Besent, Wednesday. The Wall Street Journal (WSJ) on Wednesday that administration could reduce additional tariffs on China to between approximately 50% and 65%.
On Tuesday, the US president, Donald Trump, also noted that “the discussions with Beijing are going well” and added that he believes that “they will reach an agreement.” Trump added that China tariffs would not be as high as “145%, but they would not be zero.”
However, in the long term, investors still doubt the fortress of the US dollar, since internal business activity has been hard beaten by the fears of a possible economic slowdown. The preliminary report of the Purchase Managers Index (PMI) of Global S&P showed on Wednesday that tariffs are causing companies to “increase their sales prices at a rate not seen in more than a year.” The agency warned that these higher prices “will inevitably translate into greater consumer inflation, potentially limiting the margin so that the Federal Reserve (FED) reduces interest rates at a time when an economy in deceleration seems to need an impulse.”
Daily summary of market movements: EUR/USD bounces slightly while the euro wins
- A slight recovery movement in the EUR/USD is also driven by a brief strength in the euro (EUR). The main currency earns even when the operators have become increasingly confident that the European Central Bank (ECB) will cut interest rates in the June policy meeting. The reason behind the accelerated BCE bets is the confidence of the officials in which inflation will return to the target of the central bank of 2% this year.
- On Wednesday, the policy head of the ECB and president of Bundesbank, Joachim Nagel, reiterated that he hopes that “Eurozone inflation will return to 2% throughout this year”, even when the “level of uncertainty is extraordinarily high,” reports Reuters. Nagel warned that the German economy could see a slight “recession” for the third consecutive year before the tariffs announced by President Trump.
- Apart from the monetary policy expectations of the ECB, the main trigger for the euro is the negotiations between the European Union (EU) and Washington. Although both nations have shown openness to reach an agreement and maintain healthy commercial relationships, there has been much progress since April 7, when the EU Commission of Commerce, Maros Sefcovic, declared that the administration had offered the US to the US “zero tariffs for zero” for cars and all industrial goods.
- In addition, German Finance Minister Joerg Kukies said he hopes to reach a commercial agreement with the US while he was interviewed by the Deutschlandfunk station on Wednesday. Kukies responded diplomically and raised scenarios. “The position is very simple: Plan A is that we want an agreement and the tariffs should go down instead of rising, and plan B is that if this does not work, we will use countermeasures,” he said.
Technical Analysis: EUR/USD Measures Land about 1,1300
EUR/USD strives to gain ground after a two -day correction about 1,1300 on Thursday. The main currency pair had shown a strong rebound in recent weeks after a break above September 25, 1,1215. The 20 -week exponential (EMA) mobile average about 1,0850 suggests a strong upward trend.
The 14 -week relative force (RSI) index rises near overstock levels above 70.00, indicating a strong bullish impulse, but possibilities of any correction cannot be ruled out.
Looking up, the round level of 1,1600 will be the main resistance for the torque. On the contrary, the maximum of July 2023 of 1,1276 will be a key support for the euros of the euro.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
