EUR/USD reclaims 1.1600 as US Dollar’s safe-haven appeal diminishes
- EUR/USD climbs to near 1.1600 as safe-haven assets lose steam after the announcement of Israel-Iran truce.
- Fed’s Bowman argues in favor of reducing interest rates in July.
- ECB’s Lagarde warns of downside risks to Eurozone economic growth.
The EUR/USD pair posts a fresh weekly high to near 1.1610 during late Asian trading hours on Tuesday. The major currency pair strengthens as the US Dollar (USD) has faced a sharp sell-off, following the announcement of the Israel-Iran ceasefire by United States (US) President Donald Trump.
A truce between Israel and Iran has improved investors’ risk appetite and diminished demand for safe-haven assets, such as the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls sharply to near 98.10 from its two-week high of 99.42 posted on Monday.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.31% | -0.35% | -0.55% | -0.11% | -0.61% | -0.66% | -0.01% | |
| EUR | 0.31% | -0.07% | -0.27% | 0.19% | -0.30% | -0.79% | 0.31% | |
| GBP | 0.35% | 0.07% | -0.20% | 0.27% | -0.22% | -0.71% | 0.23% | |
| JPY | 0.55% | 0.27% | 0.20% | 0.45% | -0.10% | -0.15% | 0.42% | |
| CAD | 0.11% | -0.19% | -0.27% | -0.45% | -0.50% | -0.97% | -0.03% | |
| AUD | 0.61% | 0.30% | 0.22% | 0.10% | 0.50% | -0.49% | 0.46% | |
| NZD | 0.66% | 0.79% | 0.71% | 0.15% | 0.97% | 0.49% | 0.95% | |
| CHF | 0.01% | -0.31% | -0.23% | -0.42% | 0.03% | -0.46% | -0.95% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Another reason behind weakness in the US Dollar is changing stance from Federal Reserve (Fed) officials on the monetary policy outlook towards the dovish side. On Monday, Fed Governor Michelle Bowman signaled that she is open to cut interest rates as soon as in the July policy meeting amid growing concerns over job market. “It is time to consider adjusting the policy rate, and we [Fed] should put more weight on downside risks to the job market going forward,” Bowman said.
A dovish monetary policy guidance from Fed’s Bowman has led to a slight increase in market expectations for interest rate cuts in the July meeting. According to the CME FedWatch tool, the probability for the Fed to reduce interest rates next month has increased to 22.7% from 14.5% recorded on Friday.
In the Eurozone region, European Central Bank (ECB) officials have become concerned over the economic outlook due to the tariff policy announced by US President Trump. A few ECB officials, including President Christine Lagarde have warned of downside risks to economic growth and cited concerns over the sustainability of inflation near the 2% target.
On Monday, Christine Lagarde said in her prepared remarks before the European parliament economic committee that survey data point to “some weaker prospects for economic activity in the near term”. "Risks to the growth outlook remain tilted to the downside," Lagarde added.
Euro FAQs
The Euro is the currency for the 19 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
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
