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- EUR/USD oscillates in a narrow trading band on the last day of the week.
- A hawkish Fed and a minor pullback in the equity markets benefit the buck.
- Investors scaled back bets on ECB rate cuts and help limit losses for the Euro.
The EUR/USD pair continues with its struggle to find acceptance above the 200-day Simple Moving Average (SMA) and seesaws between tepid gains/minor losses through the first half of the European session on Friday. Spot prices, however, manage to hold above the 1.0800 mark and remain at the mercy of the US Dollar (USD) price dynamics. Worries about geopolitical risks stemming from conflicts in the Middle East keep a lid on the recent optimism in the markets. This, along with growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer, helps revive demand for the safe-haven Greenback.
Meanwhile, the downside for the EUR/USD pair seems limited in the wake of expectations that signs of an economic recovery in the Eurozone should allow the European Central Bank (ECB) to wait until June before easing its monetary policy. This, in turn, warrants some caution for bearish traders and before positioning for an extension of the currency pair’s overnight sharp pullback from the vicinity of the 1.0900 mark, or a nearly three-week top. Nevertheless, spot prices seem poised to register weekly gains for the first time in the previous six in the absence of any relevant US macro data.
Daily digest market movers: Lacks any firm intraday direction amid mixed fundamental cues
- The headline German IFO Business Climate Index rose to 85.5 in February from the 85.2 previous and the final GDP print confirmed that the Eurozone’s largest economy contracted by 0.3% in Q4, failing to impress the Euro bulls
- A modest profit-taking slide in the equity markets lends some support to the safe-haven US Dollar and further caps the EUR/USD pair, though reduced bets for more aggressive rate cuts by the European Central Bank should limit losses.
- The S&P Global’s flash Eurozone composite PMI remained in the contraction territory for the ninth straight month, although it improved to 48.9 in February from the 47.9 previous and suggested that the downturn is easing.
- The minutes of the January ECB policy meeting published on Thursday showed that inflation is coming under control, albeit talk of rate cuts was premature amid rapid wage growth and underlying price pressures.
- ECB executive board member Isabel Schnabel said that monetary policy has had a weaker impact on dampening demand for services and added that risks of de-anchoring inflation expectations have come down.
- The minutes of the late January FOMC meeting on Wednesday pointed to uncertainty over how long borrowing costs should remain at the current level to bring down inflation back to the central bank’s 2% target.
- Furthermore, influential Fed officials – Fed Vice Chair Philip Jefferson, Fed Governors Lisa Cook and Christopher Waller – raised concerns about cutting rates too quickly amid sticky inflation and the US economic resilience.
- The CME Group’s FedWatch Tool indicates that the markets are currently pricing in around a 30% chance that the Fed will cut interest rates in May, while the odds for a move at the June policy meeting stand at about 66%.
- The yield on the benchmark 10-year US government bond holds steady near its highest level since late November, which, along with geopolitical risk, should act as a tailwind for the buck and cap the currency pair.
Technical Analysis: EUR/USD consolidates below Thursday’s multi-week high, downside seems limited
From a technical perspective, this week’s breakout through the 23.6% Fibonacci retracement level of the December-February downfall was seen as a key trigger for bullish traders. Adding to this, oscillators on the daily chart have just started gaining positive traction and support prospects for additional gains. That said, the overnight failure to find acceptance above the very important 200-day Simple Moving Average (SMA) and the subsequent pullback warrants some caution.
In the meantime, any subsequent move up is likely to confront some resistance near the 1.0865 zone or the 38.2% Fibo. level, ahead of a multi-week high touched on Thursday. Some follow-through buying beyond the 1.0900 mark, meanwhile, has the potential to lift the EUR/USD pair further towards the 50% Fibo. level, around the 1.0965-1.0970 region. The momentum could extend further and allow bulls to reclaim the 1.1000 psychological mark for the first time since January 11.
On the flip side, the 1.0800 mark, or the 23.6% Fibo. level seems to protect the immediate downside. Any further decline is more likely to attract fresh buyers near the 1.0760 horizontal zone. The latter should act as a pivotal point, which if broken decisively will suggest that the recent recovery from a three-month low witnessed over the past two weeks or so has run out of steam already. The EUR/USD pair might then accelerate the downfall towards retesting sub-1.0700 levels.
Euro price today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF
USD
0.02%
-0.01%
0.08%
-0.06%
0.11%
0.04%
0.15%
EUR
-0.02%
-0.03%
0.07%
-0.06%
0.09%
0.01%
0.11%
GBP
0.02%
0.03%
0.12%
-0.05%
0.14%
0.04%
0.14%
CAD
-0.08%
-0.07%
-0.12%
-0.15%
0.03%
-0.06%
0.03%
AUD
0.07%
0.08%
0.03%
0.15%
0.16%
0.09%
0.17%
JPY
-0.11%
-0.08%
-0.13%
-0.01%
-0.17%
-0.07%
0.01%
NZD
-0.05%
-0.02%
-0.04%
0.06%
-0.08%
0.08%
0.10%
CHF
-0.13%
-0.11%
-0.16%
-0.04%
-0.19%
-0.03%
-0.10%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa.The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
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