Euro looks for more heading into Thursday, but plenty of roadblocks remain
- The Euro is broadly higher on Wednesday, gaining ground across the board.
- ECB’s de Guindos noted that the Eurozone could be in a technical recession.
- Still-firm Unemployment Rate bolstering Euro even as it swamps out ECB rate cut hopes.
The Euro (EUR) saw thin but insistent broad-market gains on Wednesday, climbing against the rest of the major currency bloc in thin markets on equally thin data, with Tuesday’s Eurozone Unemployment Rate continuing to bolster the Euro as investors shrug off bearishly cautionary statements from European Central Bank (ECB) policymakers.
Europe saw its November Unemployment Rate tick lower on Tuesday, helping to prop up the Euro through the first half of the trading week, and despite the broad expanse of economic activity figures largely coming in at contractionary levels, key data continues to print better than initial investor expectations.
Daily digest market movers: Euro buoyed by not-bad-enough datapoints, ECB warnings sail passed Euro
- Euro outperforms the rest of the major currency market, in the green across the board for Wednesday and the week overall.
- European Unemployment Rate ticked down to 6.4% in November from October’s 6.5%, bolstering the EUR even as it weighs on ECB rate cut hopes and European equities.
- European equities softened on Wednesday as risk appetite wanes
- ECB Vice President de Guindos noted that Europe was likely in a technical recession in 2023’s fourth quarter as growth continues to disappoint.
- Head of Spain’s central bank Banco de España (BdE) and ECB Governing Council Member Pablo Hernandez de Cos struck a balancing tone against de Guindos’ bearish outlook.
- De Cos: “In addition to geopolitical developments, the transmission of monetary policy has been surprising us for its strength, which, if extended in the coming years, would translate into lower growth.”
- ECB’s de Guindos: Rapid pace of disinflation likely to slow down in 2024.
- The Euro sees one more speech from ECB Chief Economist Philip Lane before investors turn towards next week’s final Eurozone Consumer Price Index (CPI) figures, slated for next Wednesday.
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 | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.28% | -0.20% | 0.14% | 0.24% | 0.59% | 0.32% | -0.02% | |
| EUR | 0.28% | 0.09% | 0.44% | 0.53% | 0.90% | 0.63% | 0.26% | |
| GBP | 0.20% | -0.09% | 0.35% | 0.44% | 0.79% | 0.52% | 0.18% | |
| CAD | -0.14% | -0.43% | -0.35% | 0.10% | 0.47% | 0.19% | -0.16% | |
| AUD | -0.24% | -0.52% | -0.45% | -0.10% | 0.39% | 0.08% | -0.26% | |
| JPY | -0.61% | -0.88% | -0.80% | -0.43% | -0.33% | -0.23% | -0.62% | |
| NZD | -0.32% | -0.62% | -0.53% | -0.18% | -0.08% | 0.27% | -0.35% | |
| CHF | 0.02% | -0.27% | -0.18% | 0.17% | 0.27% | 0.62% | 0.36% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Technical Analysis: Despite stubborn topside momentum, significant headwinds remain for the Euro
The Euro is rising to claim top spot of the major currency bloc on Wednesday, in the green against its major counterparts on the day and also on the week thus far. The Euro has gained a third of a percent against the US Dollar (USD) on Wednesday, and is up around 1.2% against the beleaguered Japanese Yen (JPY), while climbing six-tenths of a percent against the New Zealand Dollar (NZD) and a fifth of a percent against the Canadian Dollar (CAD).
Despite bullish intraday momentum, the EUR/USD is set for a near-term rejection of the 200-hour Simple Moving Average (SMA), running into a technical ceiling at the top of a recent sideways channel forming on intraday charts between 1.0970 and 1.0910.
Despite intraday headwinds, the EUR/USD looks well-supported on daily candlesticks, with the pair trading just north of a bullish crossover of the 50-day and 200-day SMAs near 1.0850, though a bearish pullback into the 1.0800 handle will see the pair set for a fresh run into 2023’s low bids below 1.0500.
EUR/USD Hourly Chart
EUR/USD Daily Chart
Euro FAQs
What is the Euro?
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%).
What is the ECB and how does it impact the Euro?
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.
How does inflation data impact the value of the Euro?
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.
How does economic data influence the value of the Euro?
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.
How does the Trade Balance impact the Euro?
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
Joshua Gibson
FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.
