EUR/USD remains below 1.0900 post intraday gains, US Nonfarm Payrolls eyed
- EUR/USD extends gains as US Dollar weakens after mixed US data.
- Euro could face challenges as markets speculate over an ECB interest rate cut in June.
- US Dollar could suffer further losses if the US NFP declines as anticipated.
The EUR/USD pair extends its gains for the second consecutive day, edging higher to near 1.0880 during the European session on Friday. EUR/USD gained upward support following mixed economic data from the United States (US). Further, the subdued US Treasury yields contribute to adding pressure on the US Dollar (USD). US Treasury yields experienced downward pressure following reports from regional bank New York Community Bancorp, which indicated increased stress in its commercial real estate portfolio.
The Euro faced a decline following the release of softer German consumer inflation data on Wednesday, as market sentiment leaned towards the possibility of a speculative interest rate cut by the European Central Bank (ECB) in June. However, the European currency initiated a recovery after the release of mixed Eurozone inflation data on Thursday.
The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against a basket of six major currencies, struggles to retrace its recent losses. The DXY trades around 103.00, with the 2-year and 10-year US Treasury yields hovering around 4.23% and 3.88%, respectively, at the time of writing.
US Initial Jobless Claims rose to 224K for the week ending on January 26, exceeding both the previous increase of 215K and the expected figure of 212K. However, ISM Manufacturing PMI improved to 49.1 from the prior reading of 47.1, surpassing the anticipated figure of 47.0 in January. On Friday, key labor data is set to be released, including US Average Hourly Earnings and Nonfarm Payrolls (NFP).
Daily digest market movers: EUR/USD extends gains after mixed US economic data
- Eurozone preliminary Core Harmonized Index of Consumer Prices (YoY) increased by 3.3% in January, higher than the expected 3.2% growth but lower than the 3.4% prior.
- The annual Consumer Price Index came in at 2.8%, as expected, against the previous reading of 2.9%. The month-over-month report showed a decline of 0.4%, swinging from the 0.2% rise in December.
- German Consumer Price Index (CPI) for January showed a year-on-year increase of 2.9%, lower than the expected 3.3% and down from December's reading of 3.7%.
- Germany’s consumer inflation met expectations, rising to 0.2% MoM from the previous reading of 0.1%. The Harmonized Index of Consumer Prices YoY increased 3.1%, lower than the previous figure of 3.8%.
- The preliminary US Nonfarm Productivity increased by 3.2% in Q4, higher than the expected 2.5%, but down from the previous reading of 4.9%.
- US Challenger Job Cuts rose to 82,307 in January from the previous 34,817 in December.
- US Unit Labor Costs reported a 0.5% rise against the 1.7% expected in the fourth quarter, swinging from the previous 1.1% decline.
Technical Analysis: EUR/USD moves higher towards psychological barrier at 1.0900
EUR/USD advances to near 1.0880 on Friday, close to the immediate resistance around the psychological level at 1.0900. A breakthrough above the latter could exert upward pressure on the pair to surpass the 38.2% Fibonacci retracement level at 1.0915 to navigate the next barrier around the major level at 1.0950.
On the downside, the major level at 1.0850 appears as the key support, which is aligned with the 21-day Exponential Moving Average (EMA) at 1.0846. A break below this region could push the EUR/USD pair to approach the psychological support at 1.0800, followed by the weekly low at 1.0779.
EUR/USD: Four-Hour Chart
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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.
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.
