EUR/USD Forecast: Euro benefits from improving risk mood ahead of PMI data
- EUR/USD trades in positive territory near 1.0850 early Monday.
- The US Dollar stays on the back foot as risk mood improves.
- Preliminary March PMI data from Germany, the EU and the US will be watched closely.
Following a three-day slide, EUR/USD gains traction at the beginning of the week and trades in positive territory at around 1.0850.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.24% | -0.25% | 0.27% | -0.16% | -0.29% | 0.00% | -0.06% | |
| EUR | 0.24% | -0.12% | -0.02% | 0.12% | -0.07% | 0.30% | 0.23% | |
| GBP | 0.25% | 0.12% | 0.54% | -0.39% | 0.02% | 0.42% | 0.24% | |
| JPY | -0.27% | 0.02% | -0.54% | -0.43% | -0.58% | -0.24% | -0.34% | |
| CAD | 0.16% | -0.12% | 0.39% | 0.43% | -0.07% | 0.18% | 0.11% | |
| AUD | 0.29% | 0.07% | -0.02% | 0.58% | 0.07% | 0.38% | 0.30% | |
| NZD | -0.01% | -0.30% | -0.42% | 0.24% | -0.18% | -0.38% | -0.00% | |
| CHF | 0.06% | -0.23% | -0.24% | 0.34% | -0.11% | -0.30% | 0.00% |
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).
The improving risk mood makes it difficult for the US Dollar (USD) to build on the previous week's gains and supports EUR/USD on Monday.
The White House is adjusting its approach to tariffs set to take effect on April 2, likely omitting a set of industry-specific tariffs while applying reciprocal tariffs aimed at countries with significant trade ties to the US, the Wall Street Journal reported. Similarly, Bloomberg said US President Donald Trump's tariffs are expected to be more targeted than initially thought. Following these headlines, US stock index futures rise between 0.8% and 1.0% in the European morning.
The economic calendar will feature preliminary March Manufacturing and Services Purchasing Managers Index (PMI) data from Germany, the Euro area and the US on Monday.
The market reaction to PMI figures are likely to be straightforward and short-lived. Upbeat releases from Germany and/or the Euro area could support the Euro with the immediate reaction. On the other hand, a reading below 50 in either of the headline PMIs from the US could put additional weight on the USD's shoulders.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 50 in the European morning on Monday, reflecting a loss of bearish momentum in the near term.
On the upside, the 50-period Simple Moving Average (SMA) aligns as interim resistance at 1.0880 before 1.0900 (round level, static level). In case EUR/USD manages to stabilize above this level, it could encounter the next hurdle at 1.0950 (static level).
Looking south, supports could be spotted at 1.0800-1.0790 (static level, 100-period SMA), 1.0750 (20-day SMA) and 1.0730 (200-day SMA).
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily 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 the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen 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’s economy.
Another significant data release 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 over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
