- The EUR/USD remains stable about 1,1400 in the early Asian session on Thursday.
- The president of the Fed, Powell, warned that Trump’s tariffs could lead to a challenging stage for the US Central Bank.
- The ECB is expected to reduce interest rates for the third time this year on Thursday.
The EUR/USD pair quotes in a flat tone about 1,1400 during the early Asian session on Thursday. The markets keep the caution while the operators hope to see if the administration of the president of the US, Donald Trump, reaches new commercial agreements with their partners. The decision on the interest rates of the European Central Bank (ECB) will be the center of attention later on Thursday.
The president of the Federal Reserve (Fed), Jerome Powell, said on Wednesday that commercial tensions put at risk the employment and inflation objectives of Fed. Powell added that US economic growth seems to be slowing down, with a modest growth of consumer spending, an increase in imports to avoid tariffs that will probably weigh on the estimates of the Gross Domestic Product (GDP), and a negative feeling. Concerns about the economic deceleration in the US could drag the US dollar (USD) down and create a tail wind for the main torque.
On the other side of the ocean, the ECB is expected to reduce its key interest rate in 25 basic points (PBS) on Thursday, marking a sixth consecutive reduction in the midst of global tariff tensions and economic uncertainty. “We hope the ECB will reduce the policy rates in 25PB, totally discounted, with moderate communication on the perspectives, opening the door at rates below the neutral,” said Bank of America economist, Ruben Segura Cayuela.
The operators will take more signals from the ECB Press Conference. Any moderate comments of those responsible for policies could weigh on the short -term shared currency. However, analysts believe that the president of the ECB, Christine Lagarde, is unlikely that he offers indications on future rates reductions in the midst of uncertainty, and the ECB could decide her next steps as the data arrives.
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.
