- EUR/USD will soften on Friday at an early Asian session of about 1,1380.
- Trump said the US is negotiating with China after being denied Beijing.
- Traders have become increasingly confident that the ECB will reduce interest rates at the June meeting.
EUR/USD pair Weakens to 1.1380 on Friday during the early session of Asia. However, the downside of a large couple may be limited as investors are still concerned about the tensions of US-China trade. Later on Friday, the last reading of Michigan's consumers will appear.
US President Donald Trump said at the end of Thursday that his administration talked to China in trade. In the meantime, China said that there was no negotiation on the economy and trade, and it called for the US to cancel all unilateral tariff measures if it really wants to solve the problem. Permanent concerns about Trump's potential tariffs and persistent trade tensions are likely to weigh the green setback and act as a tail wind EUR/USD in the near future.
“It looks like there is as wide as the Pacific Ocean how US and Chinese are watching trade,” said Matt Weller, Stonex's market research manager. “And I think as long as it is cool, the dollar rallies may be short -lived.”
In the whole pond, traders raise their bets European Central Bank (ECB) reduces interest prices June at a political meeting of the ECB due to Dovyi notes. This, in turn, damages the shared currency to the USD.
Olli Rehn, a policy maker of the ECB and governor of the Finnish Central Bank, said Thursday that the central bank should not exclude “higher interest rate cuts”. In the meantime, Madis Muller, a member of the Council of the ECB, said on Wednesday that the central bank may -to lower the interest rates to a level that stimulates the economy when trade uncertainty proves to be more harmful to growth.
Euro
The euro is a currency of 19 European Union countries belonging to the eurozone. This is the second most hardly traded currency behind the US dollar. In 2022 it accounted for 31% of all currency exchange transactions, with an average daily turnover of over $ 2.2 trillion a day. EUR/USD is the most strongly traded currency pair in the world, accounting for an estimated 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 a Eurozone reserve bank. The ECB sets interest rates and manages monetary policy. The main authority of the ECB is to maintain price stability, which means either controlling inflation or stimulating growth. Its main tool is to raise or lower interest rates. Relatively high interest rates – or higher interest rate expectations – usually benefits the euro and vice versa. The ECB Council makes monetary policy decisions at meetings eight times a year. Decisions are made by Christine Lagarde, President of the EURSUONE and six permanent members, including ECB President.
Eurozone inflation data measured by a harmonized index of consumer prices (HICP) is an important econometric for the euro. If inflation increases more than expected, especially if the ECB's 2% goal, it obliges the ECB to increase interest rates to control it. Relatively high interest rates compared to its colleagues usually benefit the euro as it makes the area more attractive to global investors to park their money.
The data releases the health of the economy and can affect the euro. Such indicators such as GDP, production and service PMI, employment and consumer emotion studies can all affect the direction of the currency. A strong economy is good for the euro. Not only does it attract more foreign investment, it can encourage the ECB to set interest rates that directly strengthen the euro. Otherwise, if the economic data is weak, the euro is likely to fall. The economic data of the four largest economy in the euro area (Germany, France, Italy and Spain) are particularly important as they account for 75% of the eurozone economy.
Another important publication of the euro is the trade balance. This indicator measures the difference between what the state earns from its exports and what it spends on imports over a period of time. If the state produces exports of highly coveted exports, its currency will be obtained from purely additional demand from foreign buyers who want to buy those goods. Therefore, the positive balance of net trade strengthens the currency and, on the contrary, to obtain a negative balance.
