- The EUR/USD rises about 1,1400 while the US dollar faces an intense mass sale amid a growing commercial war between the US and China.
- The feeling of the consumer in the US has deteriorated, and the expectations of inflation to one year have accelerated in April.
- The ECB is expected to cut interest rates on Thursday.
The EUR/USD jumps about 1,1400 in the European session on Monday. The main currency pair seeks to recover the maximum of more than three years of 1,1474, which registered on Friday. The torque demonstrates a great fortress while the US dollar (USD) continues to fall in the midst of rising fears of stagflation in the United States (USA), a situation in which inflation increases, the economy deteriorates and employment cools.
The US dollar index (DXY), which measures the value of the dollar against six main currencies, sees more disadvantages below the recent minimum of 99.00.
Financial market participants anticipate a US staplation amid a deterioration of consumer’s feeling and the disagreement of consumer inflation expectations. The University of Michigan (UOM) showed on Friday that the feeling index of the preliminary consumer was significantly lower in 50.8 in April, the lowest level since June 2022. US households are concerned about the growing risks of a recession due to the increasing tariff war with China.
On Friday, China increased counter-anranceles to imports from US goods to 125%, effective as of Saturday. The Asian giant responded after US President Donald Trump increased tariffs on Chinese imports to 145%. Market participants hope that the scenario of reprisals and countermeasures of both nations hinder new investments plans by business owners, which would eventually result in moderate economic growth.
Meanwhile, consumer inflation expectations 12 months from the UOM accelerated to 6.7% in April from 5% in March. It is expected that the deterioration of the feeling of the consumer and the increase in the expectations of consumer inflation to slow the efforts of the Federal Reserve (Fed) to reduce price pressures in recent years.
On Friday, the president of the Bank of the Federal Reserve of St. Louis, Alberto Musalem, said that if the public begins to wait for “inflation to remain high in the long term”, the task of restoring “price stability and maximum employment would be much more difficult.”
What moves the market today: the EUR/USD is strengthened at the beginning of the BCE monetary policy week
- The EUR/USD advances as the euro (EUR) shows strength at the beginning of the monetary policy week. The European Central Bank (ECB) is expected to announce its decision on interest rates on Thursday, and it is expected to cut its deposit rate at 25 basic points (PBS) to 2.25%. This would be the seventh 25 PBS rate cut by the ECB since June.
- The operators have become increasingly confident that the ECB will cut interest rates again amid the expectations that Trump driven will not be inflationary to the Eurozone. Investors expect the growing tariff war between the US and China forcing the latter to export their products to the old continent. Eurozone importers would prefer Chinese products on the goods produced locally, given the low -cost competitive advantage of China. Such scenario would compensate for the impact of inflation driven by Trump’s tariffs.
- Last week, the Governing Council member of the ECB, Gediminas Šimkus, said that “a 25 PBS cut in April is needed.” Šimkus added that the announcement of US tariffs justifies a “more accommodating” monetary policy, and therefore, we need to move on to a “less restrictive policy position.”
- On commercial relations with the US, the European Union Finance Ministers (EU) have promised unity in the negotiation of a commercial agreement with Washington. The unified response of the euro zone would slightly improve its position by discussing trade negotiations with the White House.
Technical analysis: EUR/USD rises about 1,1400
The EUR/USD rises about 1,1400 during the European negotiation hours on Monday. The main currency pair firmly quotes since all long -term exponential mobile socks (EMAS) have an ascending slope, which suggests a strong bullish trend.
The 14 -day relative force index (RSI) jumps about 80.00, indicating a strong bullish impulse.
Looking up, the psychological resistance of 1,1500 will be the main resistance for the torque. On the contrary, the 1,1200 region, which limited the progress of the EUR/USD in August and September, will be the 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
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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.
