- EUR/USD remains stable ahead of the Purchasing Managers Index data release from Eurozone and Germany.
- The US Dollar may struggle due to the rising likelihood of more Fed rate cuts by the end of the year.
- ECB President Lagarde emphasized that monetary policy needs to stay adaptable.
EUR/USD maintains its position around 1.1160 during the Asian hours on Monday. The US Dollar (USD) may depreciate following the rising likelihood of further interest rate cuts by the Federal Reserve (Fed) in 2024, which may underpin the EUR/USD pair.
The US Federal Reserve cut interest rates by a larger-than-usual 50 basis points to a 4.75-5.00% range last week. Policymakers also predicted further rate cuts of 50 basis points (bps) by the end of the year.
However, Federal Reserve Chair Jerome Powell stated in the post-meeting press conference that the Fed is not in a hurry to ease policy and emphasized that half-percentage point rate cuts are not the "new pace."
On Friday, Philadelphia Fed President Patrick Harker stated that the US central bank has effectively steered through a challenging economic landscape in recent years. Harker compared monetary policy to driving a bus, where it's essential to balance speed. He also emphasized that achieving maximum employment is more than just the number of jobs—it also includes the quality of those jobs.
On the EUR front, European Central Bank (ECB) President Christine Lagarde emphasized in her speech on Friday that monetary policy needs to stay adaptable in a constantly evolving world. Although the core objectives of monetary policy, particularly price stability, remain the same, central banks must maintain flexibility to respond to the challenges of a swiftly changing global economy, according to Euronews.
Traders are expected to closely monitor the Purchasing Managers Index (PMI) data from Eurozone and Germany set to be released later in the day. the monthly PMI serves as a leading indicator of business activity, providing insights into economic health and trends.
(This story was corrected on September 23 at 08:15 GMT to say, in the second paragraph, that policymakers also predicted further rate cuts of 50 basis points (bps) by the end of the year, not 75 bps.)
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD retakes 0.6000 on the road to recovery amid US-China trade war
AUD/USD is off the five-year low but remains heavy near 0.6000 in the Asian session on Monday. The pair continues to suffer from a US-China trade war as US President Trump said that he would not do a deal with China until the US trade deficit was sorted out.
USD/JPY attempts tepid recovery above 146.00
USD/JPY kicks off the new week on a weaker note, though it manages to stage a tepid recovery above 146.00 early Monday. The global carnage, amid the mounting risk of a recession and a trade war led by Trump's sweeping tariffs, keeps the safe-haven Japanese Yen underpinned at the expense of the US Dollar.
Gold buyers refuse to give up amid global trade war and recession risks
Gold price is holding the quick turnaround from one-month lows of $2,971, consolidating the recent downward spiral. The extension of the risk-off market profile into Asia this Monday revives the safe-haven demand for Gold price.
Bitcoin, Ethereum and Ripple head to yearly lows while ETH hits two-year bottom
Bitcoin price hovers around $78,600 on Monday after falling nearly 5% the previous week. Ethereum and Ripple also followed in BTC’s footsteps and declined 13% and 10%, respectively, in the previous week.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.