- EUR/USD rose on Tuesday, regaining the 1.0300 handle.
- Euro traders are holding out hope that the French deal will avert government collapse.
- Key US CPI inflation statistics are scheduled to be released on Wednesday.
EUR/USD has enough gas in the tank for an intraday rally on Tuesday, with euro bidders hoping a potential deal in France can stave off a complete collapse of European national governments. As a result, the stock rose by more than 8/10 of 1% on this day. Market sentiment improved on Tuesday after US producer price index (PPI) inflation rose at a slower-than-expected pace, further boosting textile bids. Economic data remains limited on the European side of the market space, and textile traders will need to address the entire greenback flow.
Headline PPI inflation was 3.3% year-on-year, up from 3.0% previously. Meanwhile, core PPI rose to 3.5% year-on-year (previously 3.4%). Both were weaker than expected, but underlying inflationary pressures persist, albeit slightly less strong than many economists had expected. A weaker-than-expected PPI result will make little difference to the outlook for rate cuts, as inflation measures continue to outperform the Fed's annual target.
As for Wednesday's U.S. data, CPI is expected to rise 2.9% year over year, up from 2.7% last time, and remains well above the Fed's annual inflation target of 2.0%.
EUR/USD price prediction
EUR/USD rebounded to the 1.0300 handle on Tuesday and began a notable rally heading into Wednesday, but remains buried deep in the bearish side of the chart. It briefly fell below 1.0200 earlier this week, hitting a new 265-month low.
Fiber is trading well below its 200-day exponential moving average (EMA) after facing a technical rejection to the downside from the major moving averages in November. 1.0200 could be a useful short-term technical floor for bulls to recover from, but calm traders are waiting for signs of further lows as EUR/USD breaks out of Q1 Probably.
EUR/USD daily chart
Euro Frequently Asked Questions
The euro is the currency of the 19 European Union countries that belong to the euro area. It is the second most traded currency in the world after the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily trading volume of over $2.2 trillion. EUR/USD is the most frequently traded currency pair in the world, accounting for an estimated 30% of all trades, followed by EUR/JPY (4%), EUR/GBP (3%), and EUR/AUD (2%). ) and so on.
The European Central Bank (ECB), located in Frankfurt, Germany, is the reserve bank of the euro area. The ECB sets interest rates and controls monetary policy. The ECB's main task is to maintain price stability, which means controlling inflation or stimulating growth. The main means of doing so is raising or lowering interest rates. Relatively high interest rates, or expectations of rising interest rates, usually benefit the euro and vice versa. The ECB Governing Council decides monetary policy at its eight annual meetings. Decisions will be made by the heads of the euro zone national banks and the six permanent members of the ECB, including ECB President Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric indicator for the euro. If inflation rises more than expected, especially above the ECB's 2% target, the ECB will mandate interest rate hikes to rein in inflation. Relatively high interest rates compared to other countries typically benefit the euro, as it makes the region more attractive to global investors as a place to park their funds.
The data release will gauge the health of the economy and could have an impact on 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. As well as attracting more foreign investment, that could prompt the ECB to raise interest rates, which could directly lead to a stronger euro. Otherwise, if economic indicators are weak, the euro is likely to weaken. Economic data for the euro area's four largest economies (Germany, France, Italy, and Spain) is particularly important, as they account for 75% of the euro area economy.
Another important data regarding the euro is the trade balance. This indicator measures the difference between what a country earns from exports and what it spends on imports over a given period of time. If a country produces highly sought-after export goods, the value of its currency increases purely due to the additional demand generated from foreign buyers seeking to purchase these goods. Therefore, if the net trade balance is positive, the currency strengthens, and vice versa if it is negative.
