- The EUR / USD increases to more than 1.1325 while the US dollar faces a sale pressure before the Fed monetary policy meeting on May 6 to 7.
- President Trump said it was confident to conclude trade agreements this week.
- The ECB should continue to reduce interest rates despite the increase in the inflation of the euro zone in April.
EUR / USD is slightly negotiated at almost 1.1325 during European negotiation hours on Monday, still gaining ground after touching a three -week 1.1265 at the end of last week. The main pair of currencies increases as the US Dollar (USD) on the persistent uncertainty of the United States's trade relations (United States) -china and that investors become cautious before the announcement of the monetary policy of the Federal Reserve (Fed) on Wednesday.
The US dollar index (DXY), which follows the value of the greenback against six main currencies, falls at almost 99.80 but is negotiated inside the range of Friday.
During the weekend, American president Donald Trump expressed his confidence while speaking with journalists that bilateral trade agreements with some of his business partners could be announced this week. However, he confirmed that he had no dialogue with the Chinese leader Xi Jinping this week, but did not deny any current commercial discussion between officials from the two nations.
Although the announcement of the Bilateral Trade Transactions of Washington indicates that fears of the prices proposed by the American president Trump have now culminated, the sustainable confrontation between the two largest powers in the world will continue to keep investors on their guard.
This week, the major trigger of the US dollar will be the monetary policy meeting of the Federal Reserve (Fed), which will be announced on Wednesday. The Fed should largely leave interest rates unchanged in a range of 4.25% to 4.50%. Consequently, investors will pay particular attention to the monetary policy declaration and the press conference of the president of the Fed, Jerome Powell, to obtain indices on the prospects of interest rates.
Payroll data (PNF) better than expected for high consumer inflation expectations in the face of Donald Trump's pricing policy will be a limiting factor for Fed to reduce interest rates.
Daily Digest Market Movers: EUR / USD gains while the USD faces the pressure
- EUR / USD gains at the expense of the US dollar. The euro (EUR) is negotiated largely stable while merchants are increasingly convinced that the European Central Bank (ECB) will once again reduce interest rates at the June policy meeting despite data from the harmonized consumer price index (HICP) warmer than expected.
- The data showed Friday that the Core HICP – which excludes volatile components such as food, energy, alcohol and tobacco – increased at a faster rate by 2.7% compared to 2.5% estimates and March reading by 2.4%. During the same period, the HICP title increased regularly by 2.2% over the year, faster than estimates of 2.1%.
- Merchants continue to bet to support more BCE interest rate drops, as they are more concerned with the economic prospects of the euro area due to the benefits of Donald Trump's protectionist policy than the slight increase in inflationary pressures.
- On Friday, the vice-president of the ECB, Luis de Guindos, expressed his confidence in an interview with the newspaper Die Press of Austria according to which the Central Bank could continue to reduce interest rates, Reuters reported. “It depends on how inflation is developing. But we can be optimistic here,” said Guindos, after asking how long the ECB will continue to reduce interest rates.
- During the session on Monday, the EUR / USD pair will be influenced by the US Final data S&P Global and ISM Services Purchase Index (PMI) for April. The ISM services PMI should be less than 50.6 from 50.8 in March, indicating that the services sector increased at a moderate rate.
Technical analysis: EUR / USD recovers above 1,1300
EUR / USD holds the recovery above the key level of 1,1300 Monday from its lower three weeks of 1.1265 displayed on Thursday. The main pair of currencies rebounded after attracting offers near the 20 -day exponential mobile average (EMA) around 1,1260.
The 14-day relative resistance index (RSI) is inside the 40.00-60.00 beach, indicating that the bullish momentum has ended for the moment. However, the upward bias still prevails.
By raising the eyes, the psychological level of 1,1500 will be the main resistance of the pair. Conversely, the September 25 summit of 1.1214 will be a key support for Euro Bulls.
FAQ Euro
The euro is the currency of the 19 countries of the European Union which belong to the euro zone. It is the second most exchanged currency in the world behind the US dollar. In 2022, he represented 31% of all exchange transactions, with an average daily turnover of more than 2.2 billions of dollars per day. The EUR / USD is the most negotiated currency pair in the world, representing around 30%reduction on all transactions, followed by EUR / JPY (4%), EUR / GBP (3%) and EUR / AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank of the euro zone. 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 increase or decrease in interest rates. Relatively high interest rates – or higher rate waiting – will generally benefit the euro and vice versa. The ECB board of directors makes monetary policy decisions during meetings held eight times a year. The decisions are made by the chiefs of national banks in the euro zone and six permanent members, including the president of the ECB, Christine Lagarde.
Inflation data from the euro zone, measured by the harmonized consumer prices index (HICP), is an important econometric for the euro. If inflation increases more than expected, especially if the 2% objective of the ECB forces the ECB to increase interest rates to bring it closer. Relatively high interest rates compared to its counterparts will generally benefit the euro, as it makes the region more attractive as a place for global investors to park their money.
Data versions assess the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and PMI services, employment and surveys on consumer feelings can all influence the management of the single currency. A strong economy is good for the euro. Not only does it attract more foreign investments, but it can encourage the ECB to establish interest rates, which will directly strengthen the euro. Otherwise, if the economic data is low, the euro is likely to drop. Economic data for the four largest economies in the euro zone (Germany, France, Italy and Spain) are particularly important, because they represent 75% of the economy in the euro zone.
Another significant data press release for the euro is the trade balance. This indicator measures the difference between what a country gains from its exports and what it spends in imports over a given period. If a country produces highly sought -after exports, its currency will gain only value from the additional demand created from foreign buyers seeking to buy these goods. Consequently, a positive net trade balance reinforces a currency and vice versa for a negative balance.
