- The EUR/USD is stable as the US dollar tries to stabilize amid growing concerns for stags.
- Fed’s Bostic noted that the US Central Bank still faces a long road to reaching its 2% inflation target.
- The ECB is widely expected to offer 25 basis points of interest rate reduction on Thursday.
EUR/USD traded at nearly 1.1350 during Asian time on Tuesday and continues to slide for the second consecutive session. The pair weakens as the US dollar (USD) tries to regain stability amid growing concerns about male dogs.
Earlier on Tuesday, Atlanta Federal President Rafael Bostic commented that the Federal Reserve is still facing a long journey to lower inflation to a 2% target. His comments eased market expectations for further interest rate cuts in the near future.
In a transition from previous outlook, Deutsche Bank expects a 25 basis point rate cut in December, when two additional cuts were made in the first quarter of 2026.
Market participants are currently focusing on the European Central Bank (ECB) Bank Loan Survey (BLS). This could provide important insight into the ECB’s assessment of financial and economic situation ahead of Thursday’s policy meeting. The European Central Bank (ECB) is scheduled to hold a policy meeting on Thursday, with the market widely forecasting interest rate cuts of 25 basis points.
The Euro also found support amid growing global trade tensions and uncertainty surrounding US tariff policy. This rekindled fears about a potential recession and undermined investors’ confidence in US assets.
Investors will take a close look at the ECB’s commentary on the implications of trade tensions in the eurozone economy and the future trajectory of interest rates.
Euro FAQ
The euro is the currency of 19 European Union countries that belong to the eurozone. This is the world’s second most frequently traded currency behind the US dollar. In 2022, it accounted for 31% of all forex trading, with an average daily turnover rate of over $2.2 trillion per day. EUR/USD is the most frequently traded currency pair in the world, with all transactions taking an estimated 30% off, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany is the reserve bank of the eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s main mission is to maintain price stability. This means controlling inflation or stimulating growth. Its main tool is raising or lowering interest rates. A relatively high interest rate, or higher interest rate expectation – usually benefits the euro and vice versa. The ECB Management Council makes monetary policy decisions at its eight meetings held annually. The decision will be made by six permanent members, including the head of the national bank in the eurozone and Christine Lagarde, the president of the ECB.
Eurozone inflation data is measured by a harmonious index of consumer prices (HICP) and is an important econometric for the euro. If inflation rises more than expected, the ECB requires that interest rates be raised and reverted back to control, especially if it exceeds the ECB’s 2% target. A relatively high interest rate compared to its counterpart usually benefits the euro. This is because it makes the region more attractive as a place for global investors to park their money.
The data assesses the health of the economy and could affect the euro. Indicators such as GDP, Manufacturing and Services PMIS, Employment, and Consumer Sentiment Survey can all affect the direction of all currencies. A strong economy is good for the euro. It could not only attract more foreign investments, but it could also encourage the ECB to raise interest rates. This will directly strengthen the euro. Otherwise, the euro could fall if economic data is weak. Economic data for the four largest economies (Germany, France, Italy, Spain) (Germany, France, Italy, Spain) is particularly important, as it accounts for 75% of the eurozone economy.
Another important data release for the euro is trade balances. This indicator measures the difference between what a country makes from exports and what it spends on imports over a certain period of time. If a country produces highly popular exports, the currency acquires pure value from the extra demand generated from foreign buyers seeking to buy these goods. Therefore, a positive net trade balance strengthens the currency and vice versa.
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