EUR/USD advances modestly on stronger odds of Fed easing
- EUR/USD edges higher as the US Dollar steadies despite rising expectations for Fed easing next month.
- Strong NFP and mixed sentiment data highlight US resilience, keeping traders focused on upcoming releases.
- Fed Waller and Williams back potential December cut, boosting dovish bets ahead of PPI and Retail Sales.
EUR/USD treads water on Monday, registering modest gains of more than 0.10%, as the US Dollar (USD) consolidates despite dovish comments by Federal Reserve (Fed) officials. Although expectations for a rate cut increased, the pair trades at 1.1525 after hitting a daily high of 1.1550.
Euro posts modest gains as markets price a higher chance of a December rate cut
Last week, US economic data showed that the labor market is not as bad as expected, with Nonfarm Payrolls for September rising by 119,000 vs. 50,000 expected. Even though the week ended with mixed readings of the University of Michigan Consumer Sentiment and from S&P Global Flash PMIs, the economy remains resilient.
The Federal Open Market Committee (FOMC) is split, yet comments from Fed officials increased the odds that the Federal Reserve could reduce borrowing costs at the December 9-10 meeting.
Recently, Fed Governor Christopher Waller revealed that the weakness in the job market warrants further easing in December, but that he’s unsure about January. Last Friday, New York Fed John Williams also opened the door for a rate cut.
Ahead this week, traders eye the release of economic data, particularly the Producer Price Index (PPI) and Retail Sales, followed by Wednesday’s Initial Jobless Claims, moved in observance of the Thanksgiving holiday.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.04% | -0.04% | 0.28% | 0.11% | -0.14% | 0.01% | 0.05% | |
| EUR | 0.04% | 0.00% | 0.33% | 0.15% | -0.10% | 0.06% | 0.09% | |
| GBP | 0.04% | -0.01% | 0.33% | 0.14% | -0.11% | 0.04% | 0.08% | |
| JPY | -0.28% | -0.33% | -0.33% | -0.16% | -0.41% | -0.23% | -0.21% | |
| CAD | -0.11% | -0.15% | -0.14% | 0.16% | -0.25% | -0.09% | -0.06% | |
| AUD | 0.14% | 0.10% | 0.11% | 0.41% | 0.25% | 0.15% | 0.16% | |
| NZD | -0.01% | -0.06% | -0.04% | 0.23% | 0.09% | -0.15% | 0.04% | |
| CHF | -0.05% | -0.09% | -0.08% | 0.21% | 0.06% | -0.16% | -0.04% |
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 market movers: The Euro consolidates, waiting for further US data
- The US Dollar Index (DXY), which measures the performance of the American dollar against a basket of six other currencies, is flat at 100.16. Still, the Euro’s lack of advance could also be influenced by the shortened week for US holidays. However, economic data from the Eurozone on Friday could rock the EUR/USD boat ahead of the week.
- Federal Reserve Governor Christopher Waller remains dovish, backing a rate cut in December. In an interview with Fox Business, Waller noted that “most of the private sector and anecdotal data we've gotten is that nothing has really changed. The labor market is soft — it’s continuing to weaken.”
- Market participants see an 80% chance of a December rate cut, according to the CME FedWatch Tool. That’s a sharp jump from around 31% last week, before the New York Fed John Williams' dovish tilt.
- During the European session, the German IFO Business Climate dipped from 88.4 to 88.1 in November, below the consensus. Alongside this, the docket featured the European Central Bank (ECB) member and Bundesbank President Joachim Nagel, who said that food inflation “remains stubborn” and that the ECB remains vigilant to strong price increases in services too. He added that the current stance is appropriate.
Technical Outlook: EUR/USD downtrend remains, despite ongoing leg-up
EUR/USD capped its decline on Monday, hovering near 1.1520 after reaching a daily low near 1.1500. Nevertheless, the downtrend remains intact, confirmed by the Relative Strength Index (RSI), which remains below the 50-neutral level.
If EUR/USD rises above 1.1550, the next resistance would be the 20-day Simple Moving Average (SMA) at 1.1560. Once cleared, the next stop would be 1.1600, followed by the confluence of the 50- and 100-day SMAs at 1.1637/1.1648. A break above that zone would expose the 1.1700 level.
Conversely, a fall below 1.1500 paves the path to challenge the November 5 low at 1.1468 and the 200-day Simple Moving Average (SMA) near 1.1409.
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.
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
