EUR/USD continued its suffering throughout the week, with a loss of 0.70% likely after it fell 0.20% on Friday despite the release of mixed economic data in the US. In the EU, retail sales exceeded forecasts, but traders remained focused on US and dollar dynamics. The pair traded at 1.1636 after reaching a daily peak of 1.1662.
Euro under pressure despite mixed US data as investors focus on dollar dynamics
December’s US non-farm payrolls data were mixed as the economy added 50k jobs, below estimates for a 60k increase, and also down from November’s 64k print. Nevertheless, the US Bureau of Labor Statistics (BLS) revealed that the unemployment rate declined to 4.4% from 4.6%.
Other data showed that the housing market continues to lose momentum, as building permits and housing starts both declined in October relative to November’s readings. Meanwhile, the University of Michigan’s preliminary consumer sentiment report for January came in stronger than expected.
In the Eurozone, consumer consumption rose in November, a 0.2% MoM improvement compared to October’s flat reading and beating estimates. German data during the day was also mixed, as industrial production exceeded forecasts, although a decline in exports eased the trade balance.
Next week: Busy schedules in Europe and America
The Eurozone economic docket will include speeches from European Central Bank policymakers, sentiments on investor confidence, release of Harmonized Index of Consumer Prices (HICP) in the bloc of Germany, Spain and Italy.
In the US, the calendar will include consumer and producer price indices, retail sales, jobless claims and comments from Fed officials.
euro price this week
The table below shows the percentage change in the Euro (EUR) against the major currencies listed this week. The euro was the strongest against the Canadian dollar.
| USD | EUR | gbp | JPY | scurvy | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.78% | 0.45% | 0.66% | 1.22% | -0.18% | 0.47% | 1.07% | |
| EUR | -0.78% | -0.34% | -0.04% | 0.44% | -0.95% | -0.31% | 0.29% | |
| gbp | -0.45% | 0.34% | 0.19% | 0.78% | -0.63% | 0.03% | 0.62% | |
| JPY | -0.66% | 0.04% | -0.19% | 0.53% | -0.87% | -0.22% | 0.42% | |
| scurvy | -1.22% | -0.44% | -0.78% | -0.53% | -1.24% | -0.75% | -0.15% | |
| AUD | 0.18% | 0.95% | 0.63% | 0.87% | 1.24% | 0.66% | 1.26% | |
| NZD | -0.47% | 0.31% | -0.03% | 0.22% | 0.75% | -0.66% | 0.60% | |
| CHF | -1.07% | -0.29% | -0.62% | -0.42% | 0.15% | -1.26% | -0.60% |
The heat map shows the percentage change of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select Euro from the left column and move along the horizontal line to US Dollar, the percentage change displayed in the box will represent EUR (basis)/USD (quote).
Daily Digest Market Movers: Euro weighs on US dollar strength
- In addition to the US jobs data report, US building permits for October declined 0.2%, from 1.415 million to 1.412 million. Housing starts also softened, falling 4.6% MoM to 1.246 million from 1.306 million in September.
- The University of Michigan’s preliminary reading of consumer sentiment for January rose to 54 from November’s final reading of 52.9, beating forecasts of 53.5. US inflation expectations for one year remained unchanged at 4.2%, while expectations for five years rose to 3.4% from 3.2%.
- The CME FedWatch tool revealed that currency market prices continued to decline by 50 basis points by the end of the year.
- Atlanta Fed President Raphael Bostic said job growth was “modest,” adding that inflation “will take more time to compensate for the missing reports from last fall.”
- Later, Richmond Fed Thomas Barkin revealed that the labor market is stable, but hiring remains uncomfortably narrow. He said that it will take time till April for the inflation figures to be fully revealed.
Technical Outlook: EUR/USD declined as sellers piled in, sending the pair below 1.1650
The technical picture shows EUR/USD ranging from neutral to downside bias as bearish momentum increased as the pair fell, clearing key support levels such as the 100- and 50-day simple moving average (SMA) at 1.1663 and 1.1641, respectively.
The Relative Strength Index (RSI) shows that bears are gathering strength after the index reached the 38 threshold, close to oversold territory. Therefore, the path of least resistance is downwards.
The first support for EUR/USD will be 1.1600. A breach of the latter would expose the 200-day SMA at 1.1565, which is the last line of defense for bulls, before the pair turns bearish. Further downside lies at 1.1500 and the August 1 low at 1.1391.
On the other hand, if buyers reclaim the 50 and 100-day SMA, 1.1700 will be the next resistance level. Once cleared, traders will keep an eye on the 20-day SMA at 1.1730.
Euro FAQ
The euro is the currency of the 20 European Union countries that belong to the Eurozone. 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 turnover of more than $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, with an estimated 30% discount on all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the eurozone. The ECB sets interest rates and manages monetary policy. The primary mandate of the ECB is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is to increase or decrease interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by the six permanent members, including the heads of the eurozone’s national banks and ECB President Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the euro. If inflation rises more than expected, especially if above the ECB’s 2% target, the ECB is forced to raise interest rates to bring it back under control. The euro will generally benefit from relatively higher interest rates compared to its peers, as it makes the region more attractive as a place for global investors to park their money.
The data release reflects 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 influence the direction of the single currency. A strong economy is good for the euro. This not only attracts more foreign investment but it could also encourage the ECB to raise interest rates, which would directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to decline. Economic data from the euro area’s four largest economies (Germany, France, Italy and Spain) are particularly important, as they account for 75% of the euro area economy.
Another important data release for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period. If a country produces highly demanded exports the value of its currency will be derived entirely from the additional demand generated from foreign buyers wishing to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.
Nonfarm Payroll FAQs
Nonfarm payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The non-farm payrolls component specifically measures the change in the number of people employed in the US over the past month, excluding the agricultural industry.
The nonfarm payrolls data can influence the Federal Reserve’s decisions by providing a measure of how successfully the Fed is meeting its mandate of promoting full employment and 2% inflation. A relatively high NFP figure means that more people are in employment, earning more money and therefore potentially spending more. On the other hand, the relatively low non-farm payrolls result could mean that people are struggling to find work. The Fed will typically raise interest rates to combat high inflation resulting from low unemployment, and lower them to stimulate a stable labor market.
Non-farm payrolls generally have a positive relationship with the US dollar. This means that the USD rises when payroll figures come in higher than expected and the opposite happens when they come in lower. NFPs influence the US dollar based on their impact on inflation, monetary policy expectations and interest rates. A higher NFP generally means the Federal Reserve will be more accommodative in its monetary policy, supporting the USD.
Non-farm payrolls generally have a negative relationship with the gold price. This means that a higher than expected payroll data will have a depressing effect on the gold price and vice versa. Higher NFP generally has a positive impact on the value of the USD, and like most major commodities gold is priced in US dollars. Therefore, if the value of the USD increases, it requires fewer dollars to buy one ounce of gold. Furthermore, higher interest rates (usually helped by higher NFPs) also reduce the attractiveness of gold as an investment compared to holding it in cash, where the money will earn the least interest.
Nonfarm payrolls are only one component of the big jobs report and could be influenced by other components. At times, when NFP comes in higher than forecast but average weekly earnings are lower than expected, the market has ignored the potential inflationary impact of the headline result and interpreted the earnings decline as deflationary. Participation rate and average weekly hours components may also influence market reaction, but only in rare events such as the “Great Resignation” or the global financial crisis.
