EUR/USD declined, although the dollar pared some of its earlier gains on Friday as the week’s release of solid US economic data improved the outlook for the labor market. This reduced the chances of further easing by the Federal Reserve, which was a headwind for the greenback. The pair is trading down 0.08% at 1.1599.
Euro declines on strong US labor and production data despite weak momentum
The shared currency is set to end the week on the negative following solid unemployment claims reported on Thursday. This, coupled with a rise in factory inflation and US President Trump’s reluctance to nominate Kevin Hassett as Fed chair, pushed US Treasury yields higher and dampened expectations of further Fed easing.
As a result, the position of the dollar improved. US Treasury Secretary Scott Besant said the Fed chair’s decision would be known before Davos and Governor Stephen Miron could remain at the central bank beyond January 31.scheduled tribe.
On Friday, several Federal Reserve officials led by Vice Chairman Philip Jefferson, Governor Michelle Bowman and Boston Fed Susan Collins crossed the border. In addition to Bowman supporting further rate cuts, Jefferson and Collins consider the policy to be in a good place.
In terms of data, US industrial production rose 0.4% in December, exceeding estimates for a 0.1% decline, the Federal Reserve revealed.
In Europe, losses remained light as German inflation continued to hit the European Central Bank’s 2% annual target in December.
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 strongest against the Swiss franc.
| USD | EUR | gbp | JPY | scurvy | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.29% | 0.13% | -0.03% | 0.00% | -0.05% | -0.40% | 0.29% | |
| EUR | -0.29% | -0.16% | -0.26% | -0.29% | -0.34% | -0.69% | -0.00% | |
| gbp | -0.13% | 0.16% | -0.13% | -0.13% | -0.18% | -0.53% | 0.15% | |
| JPY | 0.03% | 0.26% | 0.13% | 0.02% | -0.04% | -0.39% | 0.31% | |
| scurvy | -0.00% | 0.29% | 0.13% | -0.02% | -0.08% | -0.41% | 0.29% | |
| AUD | 0.05% | 0.34% | 0.18% | 0.04% | 0.08% | -0.35% | 0.34% | |
| NZD | 0.40% | 0.69% | 0.53% | 0.39% | 0.41% | 0.35% | 0.69% | |
| CHF | -0.29% | 0.00% | -0.15% | -0.31% | -0.29% | -0.34% | -0.69% |
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 declines as inflation eases
- The US Dollar Index (DXY), which tracks the US currency’s performance against six peers, was up 0.03% at 99.38. US Treasury yields rising after the Hassett headline, with 10-year T-note yields rising nearly five basis points to 4.219%.
- US economic data showed a mixed inflation picture, with consumer prices stabilizing while producer-side inflation ran hot. On an annual basis, headline CPI stood at 2.7%, virtually unchanged from November, while PPI rose to 3.0% from 2.8% the previous month, highlighting long-running upward cost pressures.
- At the same time, the labor market showed signs of resilience. Last Friday’s nonfarm payrolls report was solid despite missing forecasts, while the unemployment rate fell to 4.4%, below the Fed’s 4.5% estimate. Reinforcing that strength, initial jobless claims fell from 207K to 198K, pointing to fewer Americans applying for unemployment benefits.
- Vice Chairman Jefferson said officials did not want to prejudge the January decision, adding that the current policy stance puts the US in a good position to determine how much and when to adjust rates. Governor Bowman argued that the Federal Reserve should not stop its easing cycle, saying that additional rate cuts are necessary given the increased risks to the jobs market.
- Meanwhile, Boston Fed President Susan Collins underlined the importance of central bank independence, noting that an effective central bank must remain accountable as well as free to make difficult and potentially unpopular decisions in pursuit of its mandate.
- US economic data this week showed inflation has rebounded on the producer side, while the labor market, though weakening, remains resilient after a solid initial jobless claims report on Thursday. As a result, market participants reduced their bets on a subsequent rate cut by the Fed in 2026.
- The US Dollar Index (DXY), which tracks the US currency’s performance against six peers, was up 0.03% at 99.38.
- Given the backdrop, traders downplayed the chances of further easing by the Federal Reserve. Prime market terminal data shows that 43 basis points of easing is expected by the end of 2026.
- Germany’s final harmonized consumer price index (HICP) released on Friday confirmed a softening of inflation. Prices rose 0.2% month-on-month in December, reversing November’s -0.5% decline, while annual inflation eased to 2.0% from 2.6% previously. The data prompted a modest bounce in the euro, which shrugged off session lows following the release.
Technical Outlook: EUR/USD falls below 1.1600 as it turns bearish
EUR/USD remains in a consolidation phase, although it briefly slipped below 1.1600 to reach a year-to-date low of 1.1593 before bouncing back above the figure. Despite the correction, downside momentum remains in place, with the Relative Strength Index (RSI) remaining below the neutral 50 mark – a sign that sellers remain in control.
To further push the bearish scenario, a renewed break below the 200-day simple moving average (SMA) at 1.1582 is on the radar. A decisive move below that level would be 1.1500, followed by a potentially deep decline towards the August 1 low of 1.1391.
On the positive side, buyers would need to retest 1.1600 to reduce downside pressure. A sustained push above 1.1650 exposes 1.1700 and 1.1750.
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.
