close
close

first Drop

Com TW NOw News 2024

    • EUR/USD falls but settles at 1.1100 as market awaits Powell speech
    news

    EUR/USD falls but settles at 1.1100 as market awaits Powell speech

    Vaseline Posted on

    • EUR/USD falls as high US Treasury yields support the dollar despite Fed signals of possible rate cuts in September.
    • Mixed US data: Rising jobless claims and PMI results show growth in services sector but worsening contraction in manufacturing.
    • ECB’s Kazakh suggests possible rate cuts with a cautious, restrictive policy approach.

    The EUR/USD is expected to close Thursday’s session with losses of over 0.30% after the greenback was supported by high US Treasury yields even as Fed officials back a rate cut at the upcoming September meeting. At the time of writing, the major has been stuck around the 1.1100 mark for the third day in a row.

    EUR/USD hovers around 1.1100 for third straight day, pressured by higher US Treasury yields

    Wall Street ended the session with losses ahead of Fed Chairman Jerome Powell’s speech in Jackson Hole, scheduled for tomorrow at around 14:00 GMT. Boston and Philadelphia Fed presidents Susan Collins and Patrick Harker are ready to ease policy, with the former adding that the labor market remains healthy. At the same time, the latter said the Fed should cut rates in a “methodological” manner.

    In terms of data, initial U.S. jobless claims for the week ending Aug. 17 topped the 230,000 expected, jumping by 232,000 and beating the previous reading. In terms of business activity, the S&P Global PMIs for August were mixed, with the Services PMI coming in above estimates while the Manufacturing PMI fell more sharply, signaling a deeper economic slowdown.

    Across the pond, the eurozone’s flash PMIs were mixed, but the focus was on the European Central Bank’s (ECB) ECB Martins Kazaks, who lost the thread on Bloomberg. He said he was open to a rate cut in September, but suggested a gradual approach. He added that policy would remain restrictive despite the twice-cut rates, and hinted that if inflation goes sideways, they could still cut rates.

    Ahead of the day, EUR/USD traders will be watching the release of the French Business Confidence data. On the US front, Fed Chairman Jerome Powell’s speech and the housing market data.

    EUR/USD Price Prediction: Technical Outlook

    From a technical standpoint, EUR/USD formed a two-candle ‘quasi bearish harami’ pattern, but sellers failed to push the exchange rate below 1.1100, which would have paved the way for further declines.

    Momentum is still bullish, but with the Relative Strength Index (RSI) emerging from overbought conditions, a EUR/USD drop below 1.11000 is possible.

    In that outcome, the first support would be the August 14 high of 1.1047, followed by a test of the 1.1000 mark. On the other hand, if the pair continues to hover above 1.1100, look for a retest of the year-to-date (YTD) high of 1.1174, before challenging 1.1200.

    Euro Frequently Asked Questions

    The Euro is the currency of the 20 European Union countries that make up the Eurozone. It is the second most traded currency in the world, after the US dollar. In 2022, it accounted for 31% of all currency transactions, with an average daily turnover of more than $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of 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 controlling inflation or stimulating growth. Its primary tool is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher rates – tend to benefit the euro and vice versa. The ECB’s Governing Council takes monetary policy decisions at meetings held eight times a year. Decisions are made by the heads of the eurozone’s national banks and six permanent members, including ECB President Christine Lagarde.

    Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is a key econometric information for the euro. If inflation rises more than expected, especially if it is above the ECB’s 2% target, it forces the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its peers tend to 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 influence the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence surveys can all influence the direction of the eurozone. A strong economy is good for the euro. Not only does it attract more foreign investment, it can also encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, the euro is likely to fall if economic data is weak. 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 on its exports and what it spends on imports over a given period. If a country produces highly sought-after export products, its currency will appreciate purely because of the extra demand created by foreign buyers wanting to buy these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.

    Vaseline
    View all posts

    You Might Also Like