- EUR/USD is trading cautiously around 1.0350 as the US dollar continues to rise.
- The U.S. dollar is expected to have more room to appreciate, as the Federal Reserve has indicated that it will reduce interest rates in 2025.
- Investors expect the ECB to steadily cut rates by 25 basis points at each meeting through June.
EUR/USD has been trading fragilely, hovering around 1.0350 on the first trading day of the year, its lowest level in nearly a month. Major currency pairs are on thin ice as the US dollar (USD) clings to its highest level in more than two years, with the dollar index (DXY) buoyed by expectations that the Federal Reserve will keep interest rates below 108.50. It is trading around 108.50 due to the optimistic outlook. This year has been predicted for some time.
The Fed cut its key borrowing rate by 100 basis points (bps) in 2024 as policymakers were more concerned about rising employment risks than upside risks to inflation. However, the bright US economic outlook has led to a smaller rate cut this year. Moreover, the slowing of the disinflationary trend has also forced officials to support a gradual cycle of policy easing.
Policymakers generally expect the federal funds rate to reach 3.9% by the end of 2025, higher than the 3.4% expected in September, according to the latest dot plot in the Fed's Economic Forecast Summary. It was shown that there is.
The central bank is almost certain to keep interest rates in the 4.25-4.50% range at its January meeting, according to the CME FedWatch tool.
Going forward, the US dollar will depend on December US ISM Manufacturing Purchasing Managers' Index (PMI) data to be released on Friday. The PMI is expected to fall to 48.3 from the previously announced 48.4, suggesting manufacturing activity has contracted at a slightly faster pace.
Daily digest of market moves: EUR/USD walks on a thin rope amid weak euro
- EUR/USD is also under pressure due to the weak outlook for the euro (EUR). The common currency rose slightly against the US dollar on Thursday. Still, it could face selling pressure as the European Central Bank (ECB) is expected to continue its steady rate-cutting cycle through June. This suggests that there will be four interest rate cuts and the savings scheme rate will be lowered to 2%.
- Market participants are hoping for further policy easing as price pressures in the euro zone remain on track for a sustained return to the ECB's 2% target.
- Additionally, investors are pricing in a significant decline in European exports due to increased tariffs on U.S. imports under President-elect Donald Trump's administration.
- For further clues on inflation, investors are awaiting the preliminary German and Eurozone Harmonized Consumer Price Index (HICP) figures for December to be released early next week. Investors should pay close attention to HICP data, which indicates whether the ECB will continue to ease interest rates at a steady pace of 25 basis points (bps) or switch to a higher-than-usual pace of 50 basis points (bps). It will be.
- ECB policymaker and Central Bank of Ireland Governor Gabriel Makhlouf warned in an interview with the Financial Times (FT) on December 23 that some elements of service inflation in the euro area are somewhat concerning. He emphasized the need for “gradual rate cuts, not just rate cuts.'' As long as the facts and evidence remain the same.”
- On the economic front, the final estimate of the HCOB Manufacturing PMI for December showed that factory activity contracted at a slightly faster pace to 45.1 from the preliminary figure of 45.2.
today's euro price
The table below shows the percentage change of the Euro (EUR) against the major listed currencies today. The euro was the strongest against the Canadian dollar.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | 0.16% | -0.50% | 0.23% | -0.24% | -0.19% | -0.08% | |
| EUR | -0.04% | 0.05% | -0.45% | 0.17% | -0.25% | -0.27% | -0.12% | |
| GBP | -0.16% | -0.05% | -0.57% | 0.08% | -0.40% | -0.34% | -0.28% | |
| JPY | 0.50% | 0.45% | 0.57% | 0.65% | 0.18% | 0.17% | 0.29% | |
| CAD | -0.23% | -0.17% | -0.08% | -0.65% | -0.48% | -0.45% | -0.32% | |
| australian dollar | 0.24% | 0.25% | 0.40% | -0.18% | 0.48% | -0.02% | -0.05% | |
| new zealand dollar | 0.19% | 0.27% | 0.34% | -0.17% | 0.45% | 0.02% | 0.17% | |
| swiss franc | 0.08% | 0.12% | 0.28% | -0.29% | 0.32% | 0.05% | -0.17% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select EUR from the left column and move along the horizontal line to USD, the percentage change displayed in the box represents EUR (Basic)/USD (Quote).
Technical analysis: EUR/USD fluctuates near two-year lows
EUR/USD consolidates in a descending triangle formation on the daily time frame. Horizontal support is plotted from the nearly 2-year low of 1.0330, and a downward border is drawn from the November 6th high of 1.0937. The outlook for major currency pairs remains bearish as the 20-day and 50-day exponential moving averages (EMAs) have declined at 1.0433 and 1.0556, respectively.
The 14-day Relative Strength Index (RSI) is below 40.00, indicating that the downside momentum is intact.
On the downside, the pair could break below the two-year low at 1.0330 before falling to round-level support around 1.0200. On the contrary, the psychological resistance at 1.0500 will be an important barrier for euro bulls.
economic indicators
HCOB Manufacturing PMI
The Manufacturing Purchasing Managers Index (PMI) is based on S&P Global Hamburg Commercial Bank (HCOB)is a leading indicator measuring business activity in the manufacturing sector in the euro area. This data comes from a survey of senior executives in private manufacturing companies. Survey responses reflect changes, if any, in the current month compared to the previous month and can predict trends in official data series such as gross domestic product (GDP), industrial production, employment, and inflation. Masu. The index fluctuates between 0 and 100, with a level of 50.0 indicating no change from the previous month. A reading above 50 indicates a general expansion in the manufacturing economy, which is a bullish sign for the euro (EUR). On the other hand, a reading below 50 indicates a general decline in the activity of goods producers, which is considered bearish for the euro.
Final release: Thursday, January 2, 2025 09:00
frequency: monthly
Actual: 45.1
consensus: 45.2
Previous: 45.2
sauce: S&P Global
