- The EUR/USD wins traction around 1,1370 in the first Asian session on Friday.
- The ECB cut the interest rates at its lowest level since the late 2022.
- The president of the Fed, Powell, warned that Trump’s tariffs could lead to a challenging stage for the US Central Bank.
The EUR/USD torque attracts some buyers about 1,1370 during the first Asian session on Friday. Concerns about the economic impact of tariffs continue to drag the US dollar (USD) down against the euro (EUR). The operators will closely follow the developments around the US commercial conversations. The volume of operations is expected to be light on Good Friday.
The European Central Bank (ECB) cut the interest rates for the third time this year on Thursday, carrying its main interest rate to 2.25% in response to the slow growth and tariffs of US President Donald Trump. The president of the ECB, Christine Lagarde, said during the press conference that US tariffs on EU assets, which had increased from an average of 3% to 13%, were already harming the prospects of the European economy.
Analysts believe that more rates cuts in June remain very possible and that only a great relaxation in commercial tensions would convince Pausar’s ECB. “It has a moderate tone. The approach has moved to observe the downward risk for growth perspectives instead of upward risk for inflation,” said Kirstine Kundby-Nielsen, currency analyst at Danske Bank. The moderate ECB posture could weigh on the common currency in the short term.
On the other side of the Atlantic, the president of the Federal Reserve (FED), Jerome Powell, adopted a hard line posture, saying that a weak economy and high inflation could conflict with the objectives of the Fed and make possible a stanflation scenario. Their comments reduced the probability of a reduction of Fed rates in June, which raises the US dollar (USD) compared to EUR. The monetary market operators have discounted almost 86 basic points of FED fees cuts by the end of 2025, with the first expected cut in July, according to the Fedwatch tool of the CME.
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.
