- EUR/USD rose to nearly 1.0950 in the early European session on Thursday, with an increase of 0.85% on the day.
- Trump said the EU will face 20% under the new Trump policy.
- Traders are waiting for a US March ISM Services PMI report on a fresh drive scheduled for the second half of Thursday.
The EUR/USD pair will rise to around 1.0950 during the early Asian session on Thursday. The greenback edge has been lowered against the EUR after President Donald Trump announced more aggressive tariffs on US trading partners.
Trump plans to impose a 20% tariff on EU goods and a high obligation on the country's largest trading partner. Customs duties will come into effect on April 9th. European Commission President Ursula von der Leyen vowed to retaliate on Thursday, denounced Trump's tariff levies on EU goods. Worries about the escalating impacts of the World Trade War and weaker than expected US data will raise fears about a sharp slowdown in the US global economy, and drag the US dollar down significantly.
Governor Adriana Kugler's federal government said Wednesday that it could feed inflation that would be longer than expected tariff rises in the US. Coogler said he supported stabilizing current interest rates as long as these opposite risks to inflation continue. Traders are waiting for the US weekly unemployed claims, the ultimate S&P Global Services PMI, and the ISM Services PMI. If the report shows stronger results than expected, these could lift the USD and create a tailwind for EUR/USD.
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 brings profits to the euro and vice versa. The ECB Management Council makes monetary policy decisions at eight meetings held annually. The decision will be made by six permanent members, including the head of the national bank in the eurozone and the president of the ECB, Christine Lagarde.
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.
