EUR/USD treads water with Dollar firmer and EZ inflation easing
- EUR/USD steady as light US data allows the Dollar to recover modestly in North American trade.
- Eurozone inflation cools while Germany’s IFO business confidence weakens for a second straight month.
- Markets await US CPI, jobless claims, and this week’s ECB meeting, expected to keep policy unchanged.
EUR/USD hovers around its Wednesday’s opening price at around 1.1750, virtually unchanged amid a scarce economic docket in the US that witnessed a Dollar recovery. Meanwhile, inflation figures from the Eurozone (EZ) and business confidence deterioration in Germany kept the single currency pressured.
Single currency trades flat as softer Eurozone inflation and weak German sentiment offset dovish Fed rhetoric
In the US, Atlanta Fed President Raphael Bostic crossed the wires, saying that he expects GDP growth to be solid and that he expects the trend to continue in 2026. Earlier, Fed Governor Christopher Waller struck neutral to dovish comments, saying that he supports further easing the next year.
Ahead, the US docket will feature inflation figures and the US, and Initial Jobless Claims for the week ending December 13.
Across the pond, inflation in EZ dipped a relief for the European Central Bank (ECB) which hinted that the easing cycle was done. Germany’s IFO Business Confidence poll reported that sentiment deteriorated for the second straight month.
Traders’ eyes shift to the ECB’s December monetary policy meeting, which is expected to be an event that would not move the needle, as President Christine Lagarde and Co. are expected to hold rates unchanged for this meeting and for the whole next year.
In the meantime, the conflict between Russia and Ukraine could be a headwind for the Euro. The Ukrainian President Zelenskiy exerts pressure on Europe, saying that they should use Russia’s frozen assets to end Putin’s appetite for war.
Politico revealed that the US and Russia would hold talks over the Ukraine war in Miami this weekend.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | 0.02% | -0.14% | 0.12% | 0.65% | 0.43% | -0.09% | |
| EUR | 0.03% | 0.07% | -0.13% | 0.12% | 0.70% | 0.45% | -0.06% | |
| GBP | -0.02% | -0.07% | -0.06% | 0.10% | 0.65% | 0.40% | -0.10% | |
| JPY | 0.14% | 0.13% | 0.06% | 0.25% | 0.81% | 0.56% | 0.29% | |
| CAD | -0.12% | -0.12% | -0.10% | -0.25% | 0.55% | 0.31% | -0.04% | |
| AUD | -0.65% | -0.70% | -0.65% | -0.81% | -0.55% | -0.24% | -0.75% | |
| NZD | -0.43% | -0.45% | -0.40% | -0.56% | -0.31% | 0.24% | -0.51% | |
| CHF | 0.09% | 0.06% | 0.10% | -0.29% | 0.04% | 0.75% | 0.51% |
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 steadies ahead of ECB’s meeting
- Raphael Bostic said that although it was a close call, “inflation is more worrying than jobs.” He said that GDP growth is solid and that a stronger economy “will take pressure off the job market.”
- Fed Governor Christopher Waller said that recent rate cuts have supported the labor market, noting that policy remains 50 to 100 basis points above neutral. However, he stressed that there is no urgency to deliver additional easing, adding that inflation is unlikely to reaccelerate.
- The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls increased by 64K in November, topping forecasts of 50K and rebounding from October’s revised –105K decline. However, the Unemployment Rate rose to 4.6% from 4.4%, overshooting the Federal Reserve’s 4.5% projection.
- Meanwhile, US Retail Sales stalled in October, unchanged on the month after a 0.1% gain in September and below expectations for a modest increase. In contrast, control-group sales, which feed directly into GDP calculations, rebounded sharply, rising 0.8% after a prior 0.1% contraction.
(This story was corrected on December 18 at 02:55 GMT to say that the ECB meeting will take place this week, not next week.)
Technical outlook: EUR/USD remains bullish above 1.1700
EUR/USD consolidates in the mid-range of the 1.1700-1.1800 area as traders wait for the ECB’s decision. The Relative Strength Index (RSI) is bullish, an indication that buyers are in control. But their lack of strength to clear 1.1800 would pave the way for further downside.
If EUR/USD clears 1.1800, expect a test of the 1.1850 region and, ultimately, the yearly high at 1.1918. Otherwise, the EUR/USD could drop below 1.1700, clearing the path to challenge the 100-day Simple Moving Average (SMA) near 1.1651, ahead of the 1.1600 handle.
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.
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
