EUR/USD fell 0.17% during the North American session on Friday, as the greenback pared its earlier losses as US President Donald Trump softened his trade rhetoric on China. The pair is trading around 1.1666 after reaching a daily high of 1.1728.
Euro retreats from daily highs as risk appetite improves and Fed comments remain cautiously accommodative
Risk appetite improved ahead of the Wall Street open as US President Donald Trump said higher tariffs on China were not sustainable and were likely to escalate tensions between the two countries. He said he planned to meet Xi Jinping at the Asian Pacific reunion in South Korea.
After making headlines, the greenback erased its earlier losses and moved higher. The US Dollar Index (DXY), which tracks the performance of the dollar’s value against other peers, was up 0.09% at 98.42.
Due to the lack of economic data, traders lean on Federal Reserve (Fed) officials. Most of the comments led by Governor Christopher Waller were a little milder. Meanwhile, St. Louis Fed President Alberto Musallem and Minneapolis Fed Niel Kashkari, although supporting further cuts, stressed that inflation remains hot.
In Europe, the Harmonized Index of Consumer Prices (HICP) was broadly in line with estimates in September.
Next week, the US economic docket will remain empty, but the release of Consumer Price Index (CPI) data on Friday is widely awaited by market participants.
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 Australian dollar.
| USD | EUR | gbp | JPY | scurvy | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.38% | -0.57% | -0.92% | 0.14% | 0.20% | 0.10% | -1.03% | |
| EUR | 0.38% | -0.19% | -0.49% | 0.51% | 0.67% | 0.51% | -0.66% | |
| gbp | 0.57% | 0.19% | -0.26% | 0.70% | 0.85% | 0.70% | -0.50% | |
| JPY | 0.92% | 0.49% | 0.26% | 1.00% | 1.07% | 1.08% | -0.17% | |
| scurvy | -0.14% | -0.51% | -0.70% | -1.00% | 0.03% | 0.00% | -1.19% | |
| AUD | -0.20% | -0.67% | -0.85% | -1.07% | -0.03% | -0.14% | -1.33% | |
| NZD | -0.10% | -0.51% | -0.70% | -1.08% | -0.00% | 0.14% | -1.19% | |
| CHF | 1.03% | 0.66% | 0.50% | 0.17% | 1.19% | 1.33% | 1.19% |
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 Market Movers: Dollar appreciates despite Fed’s dovish comments
- Several Federal Reserve officials struck a cautiously accommodative stance on Friday. St. Louis Fed President Alberto Musallem said he supports a rate cut at the October meeting but reaffirmed his full commitment to getting inflation back to the 2% target.
- Fed Governor Christopher Waller echoed Musallem’s comments, while Minneapolis Fed President Neel Kashkari said the economy is “not slowing down as much as we think,” with recent data suggesting resilience despite the softness.
- Eurozone inflation data in September came broadly in line with expectations, indicating stable price dynamics. Core HICP grew 0.1% MoM and 2.4% YoY, slightly above the 2.3% forecast. Headline HICP also climbed 0.1% on the month and 2.2% on the year, matching both estimates and the August reading.
- European Central Bank (ECB) officials maintained a cautious stance on Friday. The ECB’s Olaf Slijpen said policy being “in a good place” does not mean it will stay there, noting that the economy has been more resilient than expected. ECB’s Joachim Nagel said there is no need to take action on interest rates at the moment.
- On Tuesday, Fed Chairman Jerome Powell acknowledged labor market weakness and said the central bank should move toward more “neutral” interest rates.
- According to the Prime Market Terminal Probability Tool, currency markets are fully pricing in a 25-basis-point rate cut at the Fed’s October 29 meeting with a 97% probability.
Technical outlook: EUR/USD has slipped below 100-day SMA, further downside likely
Despite some improvement over the week, the technical outlook for EUR/USD remains bearish. After reaching a weekly high of 1.1728, the shared currency fell below 1.1700, opening the door to further downside.
The first support for EUR/USD will be the 100-day simple moving average (SMA) at 1.1648. Once cleared, the next stop will be the 1.1600 figure, followed by 1.1550 and 1.1500.
On the other hand, resistance is seen at 50-day SMA 1.1691, 1.1700 and daily high at 1.1728. Violation of the latter would highlight highs at 1.1800 and 1.1830 on July 1.
Euro FAQ
The euro is the currency of the 19 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.
