EUR/USD consolidates gains with US President Trump' on the spotlight
|- EUR/USD consolidates previous gains above 1.1700 after being rejected at the 1.1760 area.
- The "Sell America" trade takes a breather ahead of Trump's speech at Davos.
- ECB President Christine Lagarde will also speak at the Davos Summit later on Wednesday.
EUR/USD is posting moderate losses on Wednesday, trading right above 1.1700 at the time of writing, after having rallied 1.2% over the previous two days. The Euro (EUR) remains bid with the US Dollar on the defensive and all eyes on US President Trump's speech at the Davos Economic Summit, due later on the day.
The common currency has been drawing support from the Greenback's weakness, with the market selling all US assets, after Trump threatened some European countries with additional tariffs for their opposition to his plans to purchase Greenland.
Investors are hoping that the meeting at Davos might help de-escalate tensions, although Trump's idea of disclosing private messages from European leaders has not helped calm things down.
European Central Bank (ECB) President Christine Lagarde will also take the stage somewhat later, although her speech has been overshadowed by the rising geopolitical tensions.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.07% | -0.16% | 0.03% | -0.25% | -0.24% | 0.27% | |
| EUR | -0.10% | -0.02% | -0.26% | -0.07% | -0.35% | -0.31% | 0.17% | |
| GBP | -0.07% | 0.02% | -0.23% | -0.05% | -0.33% | -0.31% | 0.18% | |
| JPY | 0.16% | 0.26% | 0.23% | 0.19% | -0.09% | -0.07% | 0.42% | |
| CAD | -0.03% | 0.07% | 0.05% | -0.19% | -0.28% | -0.26% | 0.22% | |
| AUD | 0.25% | 0.35% | 0.33% | 0.09% | 0.28% | 0.02% | 0.53% | |
| NZD | 0.24% | 0.31% | 0.31% | 0.07% | 0.26% | -0.02% | 0.48% | |
| CHF | -0.27% | -0.17% | -0.18% | -0.42% | -0.22% | -0.53% | -0.48% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily Digest Market Movers: Investors sell US assets amid the EU-US rift
- Trump's plans to take control of Greenland and his threat of additional tariffs to European countries opposing it have triggered sharp declines in the US Dollar and US Treasury bonds this week. The "Sell America" trade has taken a breather on Wednesday, with investors awaiting signs of de-escalation at the Davos meeting.
- Meanwhile, the European Parliament is considering suspending the trade deal with the US reached in July, in retaliation for threats over Greenland. "If he wants access to the single market at zero tariffs, be reliable," said Manfred Weber, president of the European People's Party on Tuesday.
- ECB's Lagarde is widely expected to reiterate that the bank is in a good place to respond to economic uncertainty and hint at a steady monetary policy for the foreseeable future.
- The US Supreme Court is hearing arguments in the Lisa Cook case on Wednesday, in another open front of President Trump's policy, his quest to gain control over the Federal Reserve's Monetary Policy Committee.
- In the economic calendar on Tuesday, the German ZEW Survey revealed that the investors' sentiment about the German economy improved to 59.6 in January, its best reading in more than four years, from 45.8 in December, beating expectations of a 50 reading. The sentiment about the current situation has improved to -72.7 from -81 in the previous month, also above the -75.5 market consensus.
- In the US, the weekly ADP Employment Change showed an 8K increase in net jobs in the four weeks before December 27, down from 11.25K in the previous four weeks, confirming that employment creation remains at low levels.
Technical Analysis: EUR/USD consolidates gains above the 1.1700 area
EUR/USD recovery met resistance at the 78.6% Fibonacci retracement of the early January sell-off, at 1.1761, and is consolidating gains above the 1.1700 area at the time of writing. Technical indicators remain bullish. The Moving Average Convergence Divergence (MACD) holds above the zero line on the 4-hour chart, and the Relative Strength Index (RSI) prints 67, just shy of overbought territory, which reinforces a positive bias.
Immediate support is at the intra-day low of 1.1710, which closes the path towards Tuesday's low, near 1.1630, and the January 16 low, at 1.1585.
On the upside, immediate resistance is in the area between the mentioned 76.8% Fibonacci retracement, at 1.1761, and the January 2 high at 1.1765. Further up, the target is the December 24 high, right above 1.1800.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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