EUR/USD tests daily highs above 1.1430 ahead of the ECB
- The Euro advances to 1.1430 as the US Dollar extends losses.
- The ECB is expected to cut rates by 25 basis points to 2% later on Thursday.
- Weak Eurozone growth and soft inflation figures point to further easing this year.
EUR/USD retraced lost ground on Thursday´s European session, reaching intra-day highs right above 1.1430 as investors await the outcome of the European Central Bank’s (ECB) monetary policy meeting, due in a few hours.
The ECB is widely expected to cut interest rates for the eighth consecutive time, and is highly likely to signal a pause in July. The bank’s President, Christine Lagarde, will try to convey a neutral message, but the Eurozone’s weak economic growth and the moderating inflation point to further easing down the road.
The US Dollar (USD) was hit by downbeat US macroeconomic data on Wednesday, which, combined with the ongoing uncertainty over tariffs and looming concerns about US debt, is drawing investors away from US assets.
The US services sector’s activity contracted against expectations in May, according to the ISM PMI release. This is the first contraction in almost a year and follows another decline in manufacturing activity and poor factory orders seen early this week, which has revived concerns of an economic recession.
Beyond that, US ADP figures revealed a shorter-than-expected increase in employment, dampening enthusiasm about the upbeat job openings seen on Tuesday and casting doubts about Friday’s Nonfarm Payrolls report. Wednesday’s data soured market sentiment and triggered a significant reversal on the US Dollar Index (DXY).
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.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.15% | 0.23% | -0.15% | -0.32% | -0.31% | 0.08% | |
| EUR | 0.06% | -0.05% | 0.29% | -0.06% | -0.25% | -0.32% | 0.17% | |
| GBP | 0.15% | 0.05% | 0.37% | 0.00% | -0.18% | -0.27% | 0.21% | |
| JPY | -0.23% | -0.29% | -0.37% | -0.39% | -0.59% | -0.63% | -0.14% | |
| CAD | 0.15% | 0.06% | -0.00% | 0.39% | -0.21% | -0.25% | 0.23% | |
| AUD | 0.32% | 0.25% | 0.18% | 0.59% | 0.21% | -0.08% | 0.43% | |
| NZD | 0.31% | 0.32% | 0.27% | 0.63% | 0.25% | 0.08% | 0.50% | |
| CHF | -0.08% | -0.17% | -0.21% | 0.14% | -0.23% | -0.43% | -0.50% |
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: Euro hesitates ahead of the ECB decision
- The Euro is trading sideways, right above the 1.1400 level, buoyed by a US Dollar on the back foot. Investors, however, are wary of placing large Euro bets, awaiting the ECB monetary policy decision and further insight into the next steps.
- The ECB will, most likely, cut interest rates by 25 basis points to a 2% level. The main attraction of the event will be President Lagarde’s press conference, from which markets are expected to draw some fresh cues into the central bank’s plans.
- Lagarde will stick to the “meeting by meeting” line, but recent Eurozone data has shown a frail economic growth and cooling inflationary pressures, which suggest that the ECB might cut rates further later this year to support economic activity.
- Data from the Eurozone showed that Producer Prices contracted further in April, -2.2% after the previous month's -1.7%, adding to evidence of the cooling inflation pressures and strengthening the case for more ECB easing later in the year.
- In the US, ISM Services PMI fell against expectations and soured market sentiment. May’s PMI declined to 49.9 from April’s 51.6, against market expectations of a 52.00 level. Prices paid increased, and the employment subindex expanded after having contracted in the previous months.
- The negative impact of the PMI was heightened by a downbeat ADP Employment Change report, which showed a 37K increase in May’s private payrolls, well below the 115K rise anticipated by the market consensus.
- Beyond that, trade uncertainty remains high. US President Donald Trump’s 50% levies on Steel and Aluminum came into effect on Wednesday amid a lack of progress on any significant trade deal. He complained that it is “extremely hard to make a deal” with Chinese President Xi Jinping, which confirms that the world’s major economies are far from solving their trade issues.
Technical analysis: EUR/USD remains wavering above 1.1400, lacking a clear bias
EUR/USD reversal from the six-week highs hit on Tuesday has been contained at the mid-range of the 1.1300s, but the pair has lost momentum above 1.1400 with investors looking from the sidelines, a few hours ahead of the ECB’s monetary policy decision.
The four-hour chart RSI is turning flat near the 50 level, suggesting that the pair’s bullish momentum is ebbing. The lower high on Wednesday, despite the weak US data, is a negative sign.
The pair would need to breach 1.1460 to confirm the bullish trend. Above here, the 1.1500 round level is likely to attract bulls, ahead of the 261.8% Fibonacci extension, which meets trendline resistance at 1.1585.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger 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.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
