- EUR/USD remained stuck in 1.1300 regions on Wednesday.
- Fed's Fed rate is widely expected, but an extremely so many markets are caught by Powell by surprise.
- Investors are still hoping for a pivot towards the rate cuts in July.
The EUR/USD stuck in its middle ways on Wednesday, remaining near the 1.1300 handle after the latest federal reserve's (FED) rate of the latest call as well as entrepreneurs, even with fresh batch of “wait-and-see” warnings from Fed Chair Jerome Powell. The European economy calendar remains strictly mid-tier this week, leaving fiber traders sit and chew on a fed more careful.
Fed's Powell: The right thing to do is await further clarity
The recent announcement of the Fed rate features that as the U.S. work and economic activity remains strong, concerns about labor and output risks have increased, especially due to uncertainty related to tariffs and US trade policies. Understanding Fed officials about economic risks raised market expectations for imminent rates, temporarily pushing EUR/USD to a higher level.
However, market sentiment was reduced after Jerome Powell's press briefing. He emphasized that if the tariffs on the US trade, they would block Fed's goals for inflation and work for the rest of the year.
Chair Powell also warned that the ongoing uncertainty of the policy is likely to rule the Fed to adopt a ongoing 'wait-and-see' stance at interest rates. Despite the significant negative impact on consumer and business confidence caused by Trump's tariff policies, the actual economic data has shown minimal adverse effects, which complicates the Fed's justification for any immediate interest rate adjustment.
According to the CME's Fedwatch tool, market participants still expect a quarter-point rate cut in July. However, the likelihood of handling stable rates in July increased to 30%, the dip of wide market expectations for a smooth transition to a new rate of cutting rate.
EUR/USD PRICE Forecasting
EUR/USD found a temporary bottom above just 1.1200 handle, which bolstering price action in the region 1.1300. Fiber is eased from multi-moon highly posted only north of 1.1500, but the downside momentum remains limited as Euro entrepreneurs are awaiting major market development before pushing too hard in either direction.
EUR/USD Daily Chart
Euro faqs
Euro is the money for 19 European Union countries belonging to the eurozone. This is the second most seriously exchanged money in the world behind the US dollar. In 2022, it costs 31% of all foreign exchange transactions, with an average sun -shift of more than $ 2.2 trillion a day. EUR/USD is the most heavy -exchanged pair of currency in the world, providing approximately 30%off 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 for Eurozone. The ECB sets interest rates and is in charge of financial policy. The main command of the ECB is to maintain price stability, which means control of inflation or stimulation of growth. Its main tool is to increase or decrease interest rates. The relatively high interest rate – or the hope of a higher rate – usually benefits the euro and vice versa. The ECB Governing Council is making financial policy decisions at meetings held eight times a year. The decisions were made by the leaders of Eurozone National Banks and six permanent members, including ECB president Christine Lagarde.
Eurozone inflation data, which is measured by the coexistence index of consumer prices (HICP), is an essential euphoric for the euro. If inflation rises more than expected, especially if above the target of 2% of the ECB, it forces the ECB to raise interest rates to restore it under control. The relatively high interest rate compared to its counterparts can usually benefit the euro, as it makes the region more attractive as a place for global investors to park their money.
Data has released economic health and may affect the euro. Indicators such as GDP, manufacturing and services PMIS, work, and consumer sentiment surveys can influence the direction of single money. A strong economy is good for the euro. Not only does it attract more foreign investments but it can encourage the ECB to put interest rates, which directly strengthens the euro. Otherwise, if economic data is weak, the euro is likely to fall. Economic data for the four largest economies in the Euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the eurozone economy.
Another significant release of data for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports at a given period. If a country produces highly sought exports then its money gets value from excessive demand created from foreign buyers who seek to buy these goods. Therefore, a positive balance on the net trade strengthens a money and vice versa for a negative balance.
