EUR/USD clings to near 1.0740 on improved risk appetite, focus on US Retail Sales
- EUR/USD continues to gain ground due to risk-on market sentiment.
- The Euro avoided to react on remarks from the ECB President Christine Lagarde.
- ECB's forward-looking wage tracker maintains its indication of robust wage pressures.
- US Retail Sales data is expected to decline by 0.1% MoM in January against the previous growth of 0.6%.
- FedWatch Tool suggests around 90% and 59% probability of rate adjustment in March and May.
The EUR/USD pair continues its upward momentum for the second consecutive session on Thursday, finding support from a weakened US Dollar (USD) amid softer US yields. This reflects a notable shift in market sentiment, with expectations leaning towards no interest rate adjustment by the Federal Reserve (Fed) in March and May.
The Euro (EUR) faced challenges following the release of the seasonally adjusted Eurozone Gross Domestic Product (GDP) data, which stayed unchanged as expected for the fourth quarter. Christine Lagarde, the President of the European Central Bank (ECB), stated that recent data indicates ongoing subdued economic activity in the near term.
The US Dollar Index (DXY) faces challenges due to the improved risk appetite of investors. According to the FedWatch Tool, the probability of the Fed keeping interest rates steady in March and May has surged to nearly 90% and 59%, respectively. However, there is a 53% probability of a rate cut in June.
Daily digest market movers: EUR/USD appreciates on subdued US Dollar
- The US Dollar Index hovers around 104.70 with the 2-year and 10-year US Treasury yields standing lower at 4.57% and 4.23%, respectively, by the press time.
- Chicago Fed President Austan Goolsbee sought to alleviate market concerns by suggesting that higher-than-anticipated consumer prices don't necessarily preclude the Federal Reserve from considering interest rate cuts in 2024.
- Federal Reserve Vice Chair for Supervision Michael Barr attracted attention by reaffirming the Fed and its core Federal Open Market Committee's confidence in the trajectory of US inflation toward the Fed's 2% target.
- US headline Consumer Price Index (CPI) rose by 3.1% in January, surpassing the expected 2.9% but below the previous rate of 3.4%.
- US Inflation increased by 0.3% MoM, against the expectation of maintaining the previous reading of 0.2%. US Core CPI (YoY) remained consistent at 3.9% against the market expectation of a decline to 3.7% in January.
- Christine Lagarde, the President of the European Central Bank (ECB), stated that recent data indicates ongoing subdued economic activity in the near term. While the current disinflationary trend is anticipated to persist, Lagarde emphasized the importance of ensuring confidence that this trajectory will ultimately lead to the sustainable achievement of the ECB's 2% inflation target.
- ECB Vice President Luis de Guindos highlighted persistent wage pressures at elevated levels, suggesting that there is insufficient data available to confirm a reduction in these pressures.
- The preliminary Eurozone Gross Domestic Product (GDP) seasonally adjusted remained unchanged at 0.1% year-over-year in the fourth quarter, aligning with market expectations.
- The Eurozone GDP seasonally adjusted quarter-over-quarter remained flat at 0.0%, consistent with the reading in the previous quarter.
Technical Analysis: EUR/USD extends gains to near 1.0740
EUR/USD trades near 1.0740 on Thursday followed by the immediate resistance at the major level of 1.0750, followed by the 50-4hr Exponential Moving Average (EMA) at 1.0761. If the pair manages to breach these levels, it could target the area around the 23.6% Fibonacci retracement level at 1.0799, coinciding with the psychological barrier at 1.0800.
On the downside, the psychological level of 1.0700 is seen as a crucial support, coinciding with the three-month low reached at 1.0694 on Wednesday. A sustained break below this level might lead the EUR/USD pair towards testing the major support at the 1.0650 level.
In technical analysis, the EUR/USD pair exhibits a 14-day Relative Strength Index (RSI) below the 50 mark, signaling a bearish momentum. However, the Moving Average Convergence Divergence (MACD), a lagging indicator, is positioned below the centerline but has crossed over the signal line upwards, indicating a potential shift in momentum. Traders may opt to await confirmation from the MACD regarding the directional trend.
EUR/USD: Four-Hour Chart
Euro price today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.05% | 0.13% | 0.00% | -0.04% | -0.33% | -0.10% | -0.28% | |
| EUR | 0.04% | 0.18% | 0.04% | 0.02% | -0.29% | -0.06% | -0.23% | |
| GBP | -0.14% | -0.20% | -0.15% | -0.17% | -0.48% | -0.26% | -0.43% | |
| CAD | -0.01% | -0.07% | 0.11% | -0.03% | -0.31% | -0.08% | -0.25% | |
| AUD | 0.06% | -0.01% | 0.19% | 0.04% | -0.29% | -0.05% | -0.23% | |
| JPY | 0.32% | 0.26% | 0.43% | 0.32% | 0.28% | 0.24% | 0.06% | |
| NZD | 0.06% | 0.01% | 0.21% | 0.06% | 0.02% | -0.26% | -0.21% | |
| CHF | 0.25% | 0.20% | 0.39% | 0.25% | 0.24% | -0.08% | 0.15% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Euro FAQs
What is the Euro?
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%).
What is the ECB and how does it impact the Euro?
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.
How does inflation data impact the value of the Euro?
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.
How does economic data influence the value of the Euro?
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.
How does the Trade Balance impact the Euro?
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
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
