EUR/USD Forecast: Euro fails to benefit from mixed ECB commentary, eyes on US CPI
- EUR/USD holds steady above 1.1600 in the European session on Wednesday.
- ECB policymakers delivered mixed comments about the policy outlook.
- The US economic calendar will feature February CPI data.
EUR/USD stabilizes slightly above 1.1600 in the European session on Wednesday as investors await February inflation data from the United States (US), while assessing the latest headlines surrounding the Middle East crisis and comments from European Central Bank (ECB) policymakers.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.50% | -0.55% | 0.21% | -0.23% | -2.43% | -1.00% | -0.16% | |
| EUR | 0.50% | -0.08% | 0.72% | 0.25% | -1.97% | -0.52% | 0.33% | |
| GBP | 0.55% | 0.08% | 0.81% | 0.32% | -1.89% | -0.45% | 0.40% | |
| JPY | -0.21% | -0.72% | -0.81% | -0.41% | -2.60% | -1.18% | -0.34% | |
| CAD | 0.23% | -0.25% | -0.32% | 0.41% | -2.21% | -0.77% | 0.07% | |
| AUD | 2.43% | 1.97% | 1.89% | 2.60% | 2.21% | 1.47% | 2.33% | |
| NZD | 1.00% | 0.52% | 0.45% | 1.18% | 0.77% | -1.47% | 0.85% | |
| CHF | 0.16% | -0.33% | -0.40% | 0.34% | -0.07% | -2.33% | -0.85% |
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).
ECB policymaker Peter Kazimir said on Wednesday that he has no reservations to hike rates without new forecasts and added that an increase in key rates, because of the Iran war, may be closer than thought. On a more cautious tone, ECB Governing Council member François Villeroy de Galhau argued that they need to remain calm and noted that he doesn't expect a rate hike at next week's policy meeting. Finally, policymaker Joachim Nagel said that it is still too early to reliably assess the medium- to long-term consequences of the Middle East crisis.
Meanwhile, US stock index futures trade marginally higher on the day, reflecting a cautious market stance. Israel announced that it had begun an "additional wave" of strikes against targets in Tehran early Wednesday. In response, the Islamic Revolutionary Guard Corps (IRGC) of Iran also noted that it escalated its operations against the US and Israel, targeting technological infrastructure in the region.
In the second half of the day, the US Bureu of Labor Statistics (BLS) will publish the Consumer Price Index (CPI) data for February. On a monthly basis, the CPI and the core CPI are forecast to rise 0.3% and 0.2%, respectively. A stronger-than-expected print in the core CPI could be supportive for the USD and cause EUR/USD to edge lower. Conversely, a soft reading could have the opposite impact on the pair's action. Nevertheless, the market reaction could remain short-lived because February CPI data won't reflect the impact of rising crude oil prices on inflation.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1621. The near-term bias is mildly bearish as the pair holds below the downward-sloping 50-period Simple Moving Average (SMA) and the broader 100- and 200-period SMAs, which all cap the upside. Price trades beneath the Bollinger Bands’ upper line and the Relative Strength Index (RSI) hovers near 50, indicating momentum has stabilized after prior selling, yet it does not challenge the prevailing downside tilt implied by the moving averages.
Initial resistance emerges at 1.1670 (Bollinger Band upper line), and a sustained break above this level would be needed to weaken the current bearish tone and open the way toward the the 100-period SMA at 1.1723 ahead of the 200-period SMA at 1.1795. On the downside, the 20-period SMA aligns as the immediate near 1.1600 before 1.1538 (Bollinger Band lower line) and 1.1500 (static level, round level).
(The technical analysis of this story was written with the help of an AI tool.)
Euro FAQs
The Euro is the currency for the 20 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.
