EUR/USD steady near 1.16 as traders brace for US inflation data
- EUR/USD `pair trades at 1.1617, up marginally after bouncing from 1.1585 low.
- Dollar posts modest 0.05% gain as investors await Friday’s CPI; headline and core seen above 3%.
- US Existing Home Sales rose 1.5% MoM to 4.06M, beating expectations.
EUR/USD holds firm during the North American session on Thursday, as the Dollar post modest gains of over 0.05% as market participants wait for the release of September’s US inflation data. At the time of writing, the pair trades at 1.1617 after hitting a low of 1.1585.
Muted price action persists amid thin data and cautious tone ahead of key CPI print
A scarce economic docket in both sides of the Atlantic witnessed the release of tier 2 data, with Existing Home Sales in the US for September rising above estimates, in month-over-month figures.
The White House announced that US President Donald Trump’s will meet hits Chinese counterpart Xi Jinping on Thursday in South Korea, but first he will reunite with the new Prime Minister of Japan Takaichi on Tuesday, followed by a meeting with the South Korea President on Wednesday.
The EUR/USD pair ignored most of the data as traders’ attention turned to US trade rhetoric towards China, as the US government shutdown extended to its twenty third day, Traders await the release of US Consumer Price Index (CPI) data for September, which is expected to show that headline and core CPI jumped above 3%.
In Europe, Consumer Confidence in October improved to -14.2, up from the previous value of -14.9.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.40% | 0.77% | 1.33% | -0.21% | -0.38% | -0.33% | 0.38% | |
| EUR | -0.40% | 0.38% | 0.99% | -0.60% | -0.67% | -0.80% | -0.00% | |
| GBP | -0.77% | -0.38% | 0.37% | -0.97% | -1.05% | -1.17% | -0.39% | |
| JPY | -1.33% | -0.99% | -0.37% | -1.56% | -1.71% | -1.72% | -1.03% | |
| CAD | 0.21% | 0.60% | 0.97% | 1.56% | -0.13% | -0.20% | 0.59% | |
| AUD | 0.38% | 0.67% | 1.05% | 1.71% | 0.13% | -0.12% | 0.66% | |
| NZD | 0.33% | 0.80% | 1.17% | 1.72% | 0.20% | 0.12% | 0.78% | |
| CHF | -0.38% | 0.00% | 0.39% | 1.03% | -0.59% | -0.66% | -0.78% |
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 market movers: EUR/USD to remain subdues, waiting for US CPI
- The US Dollar Index (DXY), which tracks the performance of the buck’s value against a basket of its rivals, is up 0.06% at 98.94, capping the EUR/USD’s advance.
- Market participants are waiting for the release of US CPI ahead of next week’s Federal Reserve monetary policy decision. Headline and core CPI are expected to come slightly hot at 3.1% YoY. Although the Federal Reserve's policy-setting focus has shifted from inflation to the jobs market, the numbers will be closely watched.
- The US central bank is expected to cut rates 25 basis points to the 3.75% - 4% range, with traders already pricing an additional 0.25% reduction for the December meeting.
- Overnight, European Central Bank official Kazaks said “it may well be the case that the next rate move could as easily be a hike as a cut” – comments which contrast with Villeroy, who said that a cut more likely than hike and Kocher sees an equal chance.
- Regarding trade news, French President Macron has reportedly been calling on the EU to use its strongest trade tool, the Anti-coercion instrument, against China.
Technical outlook: EUR/USD consolidates, but slightly bullish
EUR/USD’s technical setup has improved slightly but remains neutrally biased as the pair trades beneath the confluence of the 20-day and 100-day Simple Moving Averages (SMAs) at 1.1653 and 1.1658 respectively. The Relative Strength Index (RSI) has slipped below the neutral 50 level, signaling that bearish momentum is strengthening.
Key support lies at 1.1600, followed by 1.1550 and 1.1500. A decisive move below this area, would expose the August 1 cycle low near 1.1391. On the upside, resistance remains clustered at the 20- and 100-day SMAs, with a break above 1.1700 opening the door to 1.1800 and the July 1 high at 1.1830.
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
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
