EUR/USD hovers near lows with all eyes on US manufacturing activity
|- EUR/USD consolidates losses around 1.1850 after dropping by over 1% on Friday.
- Eurozone and German HCOB manufacturing PMIs have been upwardly revised.
- The US Dollar remains supported by the nomination of Kevin Warsh as the next Fed Chair.
The Euro (EUR) posts marginal gains against the US Dollar (USD) on Monday, moving at 1.1867 at the time of writing, despite rather positive data from the Eurozone. The Dollar holds its ground, supported by the nomination of Kevin Warsh as the next Federal Reserve (Fed) Chair, while a risk-averse market sentiment is weighing on the Euro.
Investors showed some relief after US President Donald Trump confirmed on Friday that Kevin Warsh will replace Jerome Powell as Fed Chairman when his term expires in May. Warsh is partidary of a smaller balance sheet and has advocated for lower borrowing costs in recent times, although he is expected to take a cautious approach to inflation.
In Europe, the final HCOB Manufacturing PMI readings revealed that the sector's activity improved beyond expectations in January. The Eurozone PMI has been revised up to 49.5, from previous estimations of 49.4, and also above December's 48.8 reading. In a similar line, German PMI has been revised up to 49.1. Preliminary estimations had shown a 48.7 reading, unchanged from the previous month.
The focus now will be on the US Manufacturing Purchasing Managers' Indexes (PMI) due later today. Investors, however, are likely to remain cautious ahead of a busy economic calendar this week, which includes the Eurozone Central Bank's (ECB) monetary policy decision on Thursday and the key US Nonfarm Payrolls (NFP) report on Friday, among other relevant releases.
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 | -0.12% | -0.18% | 0.02% | 0.09% | 0.04% | 0.00% | 0.31% | |
| EUR | 0.12% | -0.05% | 0.13% | 0.22% | 0.18% | 0.12% | 0.43% | |
| GBP | 0.18% | 0.05% | 0.19% | 0.27% | 0.22% | 0.18% | 0.49% | |
| JPY | -0.02% | -0.13% | -0.19% | 0.08% | 0.03% | -0.01% | 0.30% | |
| CAD | -0.09% | -0.22% | -0.27% | -0.08% | -0.05% | -0.09% | 0.20% | |
| AUD | -0.04% | -0.18% | -0.22% | -0.03% | 0.05% | -0.04% | 0.27% | |
| NZD | -0.00% | -0.12% | -0.18% | 0.00% | 0.09% | 0.04% | 0.31% | |
| CHF | -0.31% | -0.43% | -0.49% | -0.30% | -0.20% | -0.27% | -0.31% |
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: The Dollar remains supported by Warsh's nomination
- The market has reacted positively to the nomination of Kevin Warsh as the next Fed Chief. The market is forecasting at least two rate cuts in 2026, according to data from the CME Group's Fed Watch Tool, but Warsh has already served as a Fed Governor, and he was sensitive to inflation risks during his tenure.
- German Retail Sales have shown a 0.1% growth in December, following a 0.5% decline in November and beating the market consensus that had anticipated a 0.2% drop. Year-on-year, German retail consumption accelerated by 1.5%, from 1.3% in the previous month. The impact of the data on the Euro has been minor.
- In the US, January's ISM Manufacturing PMI is expected to show a moderate improvement to 48.3 from 47.9 in December, with prices paid accelerating to a four-month high of 60.5.
- Later on, Atlanta Fed President Raphael Bostic will take the stage. Bostic has been reluctant to cut interest rates and recently affirmed that the balance sheet is "about right" last week, which brings to light the divergences within the central bank's committee.
Technical Analysis: EUR/USD hovers above 1.1835 with bears in control
The EUR/USD is on a bearish correction, hovering near 1.1850 after pulling back from four-year highs near 1.2100. Technical indicators are pointing lower on the 4-hour chart. The Relative Strength Index (RSI) has dropped below the key 50 level, and the Moving Average Convergence Divergence (MACD) histogram shows expanding negative bars.
The pair has found some footing above the January 26 low, at the 1.1835 area, and the 50% Fibonacci retracement of the late-January rally, at 1.1830. Further down, the target is the 61.8% Fibonnaci retracement of the mentioned cycle, at the 1.1770 area.
Upside attempts are likely to be challenged at Friday's high, near 1.1955, ahead of the round 1.2000 level.
German economy FAQs
The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany's economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany's economy strengthens, it can bolster the Euro's value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro's strength and perception in global markets.
Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the 'Fiscal Compact' following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.
Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.
German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond's price, and it is therefore considered a more accurate reflection of return. A decline in the bund's price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.
The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).
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