- An upward revision of Eurozone services’ activity has provided some support to the Euro
- The US Dollar had bounced up in previous sessions, following strong US job openings numbers.
- US Services PMI and ADP employment are in focus on Wednesday.
EUR/USD has been capped at 1.1400 and is trading near 1.1380 at the moment of writing, as the positive impulse from Eurozone services activity faded. May’s Services PMI has been upwardly revised to a 49.7 reading from the previous 48.9, which triggered a positive reaction on most Euro crosses.
The pair had retreated from six-week highs at the 1.1455 area on Tuesday, with the US Dollar buoyed by an unexpected increase in US job openings. In Europe, a softer-than-expected Eurozone Consumer Prices Index (CPI) release left the path clear for the European Central Bank (ECB) to ease monetary policy further over the coming months.
The ECB opens a two-day monetary policy meeting, which is highly likely to conclude with a 25 basis points (bps) interest rate cut to be announced on Thursday. The main interest of the event will be on the ECB President Christine Lagarde’s ensuing press release to assess the chances of a pause in July.
Later in the American session, the US ISM Services PMI and ADP Employment Change figures will provide some guidance for the US Dollar, on a day when US trading partners are expected to submit their “best offers” to reach trade deals that, so far, remain elusive.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.20% | -0.16% | -0.04% | -0.04% | -0.13% | -0.20% | -0.13% | |
| EUR | 0.20% | 0.01% | 0.13% | 0.14% | 0.07% | -0.02% | 0.06% | |
| GBP | 0.16% | -0.01% | 0.08% | 0.12% | 0.06% | -0.03% | 0.04% | |
| JPY | 0.04% | -0.13% | -0.08% | 0.03% | -0.13% | -0.09% | -0.05% | |
| CAD | 0.04% | -0.14% | -0.12% | -0.03% | -0.09% | -0.16% | -0.09% | |
| AUD | 0.13% | -0.07% | -0.06% | 0.13% | 0.09% | -0.09% | -0.02% | |
| NZD | 0.20% | 0.02% | 0.03% | 0.09% | 0.16% | 0.09% | 0.07% | |
| CHF | 0.13% | -0.06% | -0.04% | 0.05% | 0.09% | 0.02% | -0.07% |
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 US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: Euro changes direction with US data and the ECB in focus
- The Euro reversed course after an unexpected revision of the Eurozone Services PMI data revealed that the sector’s activity contracted less than expected. Demand has remained weak, weighing on the overall reading. New business fell for the fourth consecutive month, but employment in the sector rose, and business confidence improved, according to the report.
- On Tuesday, the Eurozone CPI showed that inflation fell below the ECB’s 2% target, adding pressure on the Euro. Monthly inflation stalled in May, with the headline CPI rate down to a 1.9% year-over-year (YoY), against expectations of a 2% reading. Core inflation eased to 2.3% YoY, beyond the 2.5% expected.
- In the US, JOLTS Job Openings, a relevant employment gauge for the Federal Reserve (Fed), increased to 7.39 million in April, against expectations of a slight decline to 7.1 million and from March’s 7.2 million reading.
- April’s US Factory Orders resulted in a 3.7% contraction, which declined beyond the 3% expected, highlighting the negative impact of US President Trump’s trade policy on manufacturing activity.
- In the Eurozone economic calendar, the main focus is May’s final HCOB Services PMI reading, which is expected to confirm that the sector’s activity contracted to 48.9 in May, following five consecutive months of growth.
- During the US session, the focus will shift to the ADP Employment report, which will set the expectations for Friday’s all-important Nonfarm Payrolls release. The market anticipates an increase to 115,000 new payrolls in May, after April’s 62,000 reading.
- Beyond that, the US ISM Services PMI is likely to show some acceleration in business activity in May. These figures are expected to feed investors’ appetite for risk, which, over the recent weeks, has favoured the USD rather than the Euro.
Technical analysis: EUR/USD corrects lower after rejection at 1.1455
EUR/USD hit six-week highs at 1.1450 on Monday but failed to consolidate at those levels and has returned to the mid-range of the 1.1300s.
The immediate trend remains positive, but technical indicators in 4-hour charts are approaching bearish territory, and the US Dollar Index is gaining momentum. Correlation studies suggest that further correction is on the cards for the index on Wednesday.
The 1.1365 level is holding bears for now, with the next support areas at 1.1310 and the May 20 and 29 lows in the 1.1210 area. On the upside, immediate resistance is at 1.1410 and Tuesday’s high at 1.1455.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
