EUR/USD dips 0.17% in the North American session on Friday as the Greenback pars its earlier losses as US President Donald Trump moderated his trade rhetoric towards China. The pair is trading at around 1.1666 after hitting a daily high of 1.1728.
Euro pulls back from daily highs as risk appetite improves and Fed remarks remain cautious.
Risk appetite improved before Wall Street opened as U.S. President Donald Trump said high tariffs on China were unsustainable and were likely to increase tensions between the two countries. He added that he plans to meet Xi Jinping at the Asia-Pacific summit in South Korea.
Following the headlines, the Greenback erased its earlier losses and rallied. The US Dollar Index (DXY), which tracks the performance of the buck against a basket of peers, rose 0.09% to 98.42.
The lack of economic data has traders leaning on Federal Reserve (Fed) officials crossing the lines. Most of the remarks were somewhat dovish, led by Governor Christopher Waller. Meanwhile, St. Louis Fed President Alberto Musalem and Minneapolis Fed Neel Kashkari, although they favor further cuts, that inflation remains warm.
In Europe, the Harmonized Index of Consumer Prices (HICP) was broadly in line with September estimates.
Next week, the US economic overview is still empty, but the publication of the consumer price index (CPI) on Friday is highly anticipated by market participants.
Euro Price this week
The table below shows the percentage change of the Euro (EUR) against major listed currencies this week. The Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.38% | -0.57% | -0.92% | 0.14% | 0.20% | 0.10% | -1.03% | |
| EUR | 0.38% | -0.19% | -0.49% | 0.51% | 0.67% | 0.51% | -0.66% | |
| GBP | 0.57% | 0.19% | -0.26% | 0.70% | 0.85% | 0.70% | -0.50% | |
| JPY | 0.92% | 0.49% | 0.26% | 1.00% | 1.07% | 1.08% | -0.17% | |
| CAD | -0.14% | -0.51% | -0.70% | -1.00% | 0.03% | 0.00% | -1.19% | |
| AUD | -0.20% | -0.67% | -0.85% | -1.07% | -0.03% | -0.14% | -1.33% | |
| NZD | -0.10% | -0.51% | -0.70% | -1.08% | -0.00% | 0.14% | -1.19% | |
| CHF | 1.03% | 0.66% | 0.50% | 0.17% | 1.19% | 1.33% | 1.19% |
The heat map shows percentage changes of major currencies in relation to each other. The base currency is selected from the left column, while the bid currency is selected from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will represent EUR (basis)/USD (quote).
Daily market moves: Dollar gains despite Fed’s dovish comments
- Several Federal Reserve officials spoke on Friday and offered a cautiously dovish tone. St. Louis Fed President Alberto Musalem said he supports a rate cut at the October meeting but reaffirmed his full commitment to bringing inflation back to the 2% target.
- Fed Governor Christopher Waller echoed Musalem’s remarks, while Minneapolis Fed President Neel Kashkari noted that the economy is “not slowing down as much as we think,” suggesting resilience despite softening recent data.
- Eurozone inflation data came broadly in line with expectations in September, signaling stable price dynamics. Core HICP rose 0.1% moM and 2.4% y-o-y, slightly above the 2.3% forecast. Headline HICP also rose 0.1% on the month and 2.2% on the year, matching both projections and August readings.
- European Central Bank (ECB) officials maintained a cautious tone on Friday. The ECB’s Olaf Sleijpen said that policy being “in a good place” does not mean it will stay there, noting that the economy has been more resilient than expected. The ECB’s Joachim Nagel added that there is no need to act on interest rates for now.
- On Tuesday, Fed Chairman Jerome Powell was dovish, acknowledging labor market weakness and adding that the central bank should move to more “neutral” interest rates.
- Money markets are fully pricing in a 25 basis point rate cut at the Fed’s Oct. 29 meeting with 97% odds, according to the Prime Market Terminal probability tool.
Technical outlook: EUR/USD dips below 100-day SMA, further bearish eyes
EUR/USD’s technical outlook remains bearishly biased, despite improving slightly this week. After reaching a weekly high of 1.1728, the shared currency fell below 1.1700, opening the door for further downside.
EUR/USD first support would be the 100-day Simple Moving Average (SMA) at 1.1648. Once it is cleared, the next stop will be the number 1.1600, followed by 1.1550 and 1.1500.
On the downside, resistance is seen at the 50-day SMA at 1.1691, 1.1700 and the daily high at 1.1728. A break of the latter will reveal 1.1800 and the July 1 high at 1.1830.
Euro Frequently Asked Questions
The euro is the currency of the 19 EU countries that belong to the eurozone. It is the second most traded currency in the world behind the US dollar. By 2022, it accounted for 31% of all foreign exchange transactions with an average daily turnover of over $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% discount on 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 euro area. The ECB sets interest rates and controls monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher interest rates – will usually benefit the euro and vice versa. The ECB’s Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are taken by the heads of the eurozone’s national banks and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, as measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the euro. If inflation rises more than expected, especially if it exceeds 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 measure the health of the economy and can affect 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 raise 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 Eurozone (Germany, France, Italy and Spain) are particularly important as they account for 75% of the Eurozone economy.
Another important 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, its currency will gain in value solely from the additional demand created by foreign buyers seeking to purchase those goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.