EUR/USD nudges lower as investors await US President Trump's speech
- EUR/USD consolidates previous gains above 1.1710 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.)
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
