- EUR / USD is negotiated on laterally 1.1370 before the Fed monetary policy decision.
- Investors will focus on Fed directives on monetary policy prospects.
- The conservative chief Merz was sworn in as a German Chancellor in his second attempt.
EUR / USD is negotiated flatly nearly 1.1370 during European negotiation hours on Wednesday. The main pair of currencies is consolidated as US dollar (USD) is negotiated flat before the announcement of the monetary policy of the Federal Reserve (Fed) at 6:00 p.m. GMT. The Euro (EUR) is firmly negotiated against his other peers after the conservative chief Friedrich Merz took an oath as a Chancellor of Germany in a second attempt. Merz failed to obtain an absolute majority in the first attempt despite the CDU / CSU and the Social Democrats having collectively a voting bank of 326. Merz received 310 votes during the first attempt, six less than the 316 who were to be elected as German Chancellor.
Friedrich Merz's confirmation as Chancellor has reduced fears of political instability and should stimulate defense expenditure measures approved in March. This scenario would strengthen the German economy and promote Euros and German assets.
However, the Euro increase seems to be limited because the European Central Bank (ECB) should continue to mitigate monetary policy at the June meeting. The ECB is almost sure to reduce its main interest rates again next month, because officials focus more on the absorption of economic shocks in the face of the prices announced by the US President Trump than the inflation of the euro zone, which should return to the target of the central bank of 2% this year
On the global level, the European Union commission (EU) actively envisages measures to compensate for the impact of higher tariffs by the United States. On Tuesday, EU trade commissioner Maros Sefcovic said the continent explored countermeasures while Trump delayed the reciprocal 90-day prices. However, Sefcovic said that the main priority of the EU is commercial resolution with the United States. A Bloomberg report showed Tuesday that the The EU plans to reach around 100 billion euros in American products with additional prices if commercial talks fail to provide a satisfactory result for the block.
Economically, data on the retail sales of the EU for Mars are lower and lower than expected. Data on retail sales, a key measure of consumption expenditure, decreased by 0.1% per month, while investors expected a flat -rate performance. In February, the measurement of consumption expenditure increased by 0.2%, revised down 0.3%. Retail sales in annual sliding increased by 1.5%, slow than estimates of 1.6%and the previous release of 1.9%, revised down 2.3%.
Daily Digest Market Movers: EUR / USD Flat exchange, investors expect US-Chinese commercial discussions
- EUR / USD oscillates before the Fed interest rate decision. According to the CME Fedwatch tool, traders have a price entirely in that the Fed will leave the interest price Stable in the current beach of 4.25% to 4.50%. Investors will pay particular attention to the declaration of monetary policy and The president of the president of the Fed, Jerome Powell, to obtain new indices over the duration of the central bank will maintain a restrictive monetary policy position.
- FED officials have indicated that the adjustments in monetary policy are not appropriate until they see cracks on the labor market and economic growth, because consumer inflation expectations have been stripped due to the reduction of new economic policies by UNITED STATES (United States) President Donald Trump.
- April Non -agricultural payrolls Data (NFP) have shown regular employment growth, a limiting factor for the Fed in the reduction of interest rates. Meanwhile, the American economy contracted 0.3% in the first quarter of the year, but the reason was the sharp increase in imports according to owners of American companies to avoid the impact of higher prices.
- Unlike Fed's advice, President Trump has repeatedly urged the Central Bank, in particular Jerome Powell, to reduce interest rates. Trump also threatened to release Powell from his functions for not having reduced borrowing costs despite the relaxation of energy prices, food products, etc.
- Before the Fed policy, the US dollar oscillates in a tight range, the US dollar index (DXY) consolidating approximately 99.55.
- Apart from Nourished Policy, US-Chinese trade discussions in Geneva are a major trigger for the US dollar. The secretary in the United States of the Treasury Scott Bessent and the commercial representative Jamieson Greer confirmed on Tuesday evening that they would meet their Chinese counterparts for commercial discussions. Investors consider this as a constructive step towards de-escalation in the Sino-Us trade war, which supported the contracts on S&P 500.
Technical analysis: oscillates EUR / USD around 1,1350
Wednesday, EUR / USD near the summit on Tuesday approximately 1.1370. However, the prospects Pair remains optimistic because it holds the 20 -day exponential mobile average (EMA) around 1.1270.
The 14-day relative resistance index (RSI) is inside the beach of 40.00-60.00, indicating that the bullish momentum is concluded 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 Nourished
In the United States, monetary policy is shaped by the Federal Reserve (Fed). The Fed has two mandates: reach price stability and promote full employment. Its main tool to achieve these objectives is to adjust interest rates. When prices are increasing too quickly and inflation is greater than the 2% target of the Fed, it increases interest rates, increasing borrowing costs throughout the economy. The result is a stronger US dollar (USD) because it makes the United States a more attractive place for international investors to park their money. When inflation falls below 2% or the unemployment rate is too high, the Fed can reduce interest rates to encourage the loan, which weighs on the greenback.
The Federal Reserve (Fed) organizes eight political meetings per year, where the Federal Open Market Committee (FOMC) assesses the economic conditions and makes monetary policy decisions. The FOMC is assisted by twelve officials of the Fed – the seven members of the Council of Governors, the president of the Federal Reserve Bank of New York and four of the eleven presidents of the remaining regional reserve bank, who have a period of one year on a rotating basis.
In extreme situations, the federal reserve can use a policy called quantitative relaxation (QE). QE is the process by which the Fed considerably increases the credit flow in a blocked financial system. It is a non -standard political measure used during crises or when inflation is extremely low. It was the Fed's weapon of choice during the great financial crisis in 2008. It implies the Fed Print more dollars and use them to buy high -level bonds from financial institutions. QE generally weakens the US dollar.
The quantitative tightening (QT) is the opposite process of the QE, by which the federal reserve ceases to buy obligations from financial institutions and does not reinvest the principal of the obligations it holds at maturity, to buy new obligations. It is generally positive for the value of the US dollar.
