EUR/USD continues its rise as Dollar retreats on Fed action and soft data
- Euro benefits from broad Dollar weakness, while ECB’s Lagarde says policy is appropriately positioned for now.
- US jobless claims rose and trade deficit narrowed, reinforcing views that the US economy is losing momentum.
- Fed cut rates 25 bps and Powell signaled flexibility ahead, boosting rate-cut expectations into early 2026.
EUR/USD advances during the North American on Thursday up 0.41% after the Fed decided to cut rates, alongside the release of weaker than expected job data in the United States (US). At the time of writing, the pair trades at 1.1742 after bouncing off daily lows of 1.1682.
Euro strengthens after a dovish Fed and weaker US labor figures deepen expectations of further policy easing
US economic data was mixed as the number of Americans filling for unemployment benefits rose, an indication of weakness in the jobs market. Later, the trade deficit narrowed in September, via the US Census Bureau.
On Wednesday, the Federal Reserve cut rates by 25 basis points to 3.50%-3.75%, yet most officials in the dot-plot showed that the median were expecting the Fed funds rate to end at a higher level. Meanwhile, the Fed Chair Jerome Powell hinted that Fed is “well positioned to determine the extent and timing of additional adjustments to out policy rate based on the incoming data, the evolving outlook and the balance of risks.”
This week, the US economic docket will feature Fed speakers, led by Philadelphia’s Fed Anna Paulson, Cleveland’s Fed Beth Hammack and Chicago’s Austan Goolsbee.
Across the pond, the Eurozone schedule was empty, yet European Central Bank (ECB) President Christine Lagarde said that policy is in a good place ant that the bank could update its projections in December.
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 | -0.81% | -0.47% | 0.17% | -0.42% | -0.42% | -0.64% | -1.15% | |
| EUR | 0.81% | 0.38% | 1.06% | 0.44% | 0.44% | 0.22% | -0.30% | |
| GBP | 0.47% | -0.38% | 0.69% | 0.09% | 0.07% | -0.16% | -0.67% | |
| JPY | -0.17% | -1.06% | -0.69% | -0.58% | -0.58% | -0.79% | -1.28% | |
| CAD | 0.42% | -0.44% | -0.09% | 0.58% | 0.00% | -0.21% | -0.73% | |
| AUD | 0.42% | -0.44% | -0.07% | 0.58% | -0.01% | -0.23% | -0.74% | |
| NZD | 0.64% | -0.22% | 0.16% | 0.79% | 0.21% | 0.23% | -0.52% | |
| CHF | 1.15% | 0.30% | 0.67% | 1.28% | 0.73% | 0.74% | 0.52% |
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: EUR/USD boosted by US Dollar weakness
- The US Dollar Index (DXY), which tracks the performance of the buck’s value against six currencies, is down 0.29% at 98.34 as the Dollar selloff extends following the Fed’s decision.
- US Initial Jobless Claims for the week ending December 6 increased by 236K, exceeding the previous week’s upwardly revised 192K, according to the Department of Labor. In contrast, Continuing Claims for the week ending November 29 fell to 1.838 million from 1.937 million, suggesting some stabilization in longer-term unemployment.
- The US Goods and Services Trade Balance narrowed to –$52.8 billion in September, improving from –$59.3 billion in August and outperforming expectations for a widening deficit toward –$63.3 billion.
- On Wednesday, the Fed Chair Powell stated that the central bank is “well positioned” to “wait and see” how the economy develops, following a total easing of 75 basis points this year. He mentioned that the Fed funds rate is near the upper end of estimates for neutrality and that they will await economic data, which may be “distorted.”
- In Europe, Portugal’s former central-bank Governor Mario Centeno emerged as a potential contender to become the ECB’s next Vice-President succeeding the Spanish Luis De Guindo whose term is expiring in May 2026.
Technical analysis: EUR/USD surpasses 1.1700, eyes on 1.1750
EUR/USD finally cleared the top of the 1.1600-1.1650 range, extending its gains past 1.1700 with traders eyeing the 1.1800 figure. Bullish momentum has increased as depicted by the Relative Strength Index (RSI), an indication that further upside is seen.
Conversely, if EUR/USD slides below 1.1700, sellers could opt to send prices towards the 100-day Simple Moving Average (SMA) at 1.1641 ahead of 1.1600.
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
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
