- EUR/USD consolidates gains near 1.0900 following Wednesday’s rally.
- ECB is widely expected to leave key rates unchanged after March meeting.
- Revised macroeconomic projections and ECB President Lagarde’s comments could drive the Euro’s valuation.
EUR/USD gathered bullish momentum and climbed to its highest level since late January above 1.0900 on Wednesday. The pair stays in a consolidation phase at around 1.0900 on Thursday as investors gear up for the European Central Bank’s (ECB) monetary policy announcements.
Euro price this week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.51% | -0.59% | -0.28% | -0.81% | -1.28% | -0.71% | -0.20% | |
| EUR | 0.50% | -0.08% | 0.23% | -0.30% | -0.75% | -0.18% | 0.31% | |
| GBP | 0.59% | 0.09% | 0.30% | -0.22% | -0.67% | -0.12% | 0.40% | |
| CAD | 0.28% | -0.22% | -0.30% | -0.53% | -0.98% | -0.41% | 0.08% | |
| AUD | 0.80% | 0.29% | 0.22% | 0.53% | -0.45% | 0.10% | 0.60% | |
| JPY | 1.26% | 0.74% | 0.62% | 0.96% | 0.42% | 0.55% | 1.05% | |
| NZD | 0.70% | 0.18% | 0.10% | 0.41% | -0.12% | -0.57% | 0.51% | |
| CHF | 0.20% | -0.31% | -0.39% | -0.08% | -0.61% | -1.08% | -0.51% |
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).
The broad-based selling pressure surrounding the US Dollar (USD) fuelled EUR/USD’s rally mid-week. Although Federal Reserve (Fed) Chairman Jerome Powell refrained from providing any fresh clues on the timing of the policy pivot, the benchmark 10-year US Treasury bond yield retreated toward 4.1% and weighed on the USD.
Powell reiterated that incoming data will determine when they will start reducing the policy rate and added that there was no reason to think the economy was in or facing a significant near-term risk of recession. According to the CME FedWatch Tool, markets are currently pricing in a nearly 90% probability of a Fed rate cut in June.
Later in the day, the ECB is widely expected to leave key rates unchanged. Alongside the policy statement, the ECB will release the revised macroeconomic projections. Upward revisions to inflation and growth expectations could suggest that the ECB is likely to delay a policy pivot and provide a boost to the Euro.
ECB President Christine Lagarde will speak on the policy outlook and respond to questions. According to Reuters, interest rate futures nearly fully price in a 25 basis points reduction in the ECB’s key rates in June. The market positioning suggests that in case Lagarde leaves the door open for another pause in policy in June, the Euro could continue to gather strength against its rivals. On the other hand, although a confirmation of a policy pivot in June could weigh on the Euro with the immediate reaction, this negative impact on the currency could remain short-lived unless it’s backed by downward revisions to growth and inflation forecasts.
EUR/USD Technical Analysis
EUR/USD holds comfortably above the ascending trend line, while the Relative Strength Index (RSI) indicator on the 4-hour chart retreats toward 60, suggesting that the bullish bias remains intact and the pair is staging a technical correction.
1.0900-1.0910 (psychological level, Fibonacci 50% retracement of the latest downtrend) aligns as first resistance before 1.0940 (static level) and 1.0960 (Fibonacci 61.8% retracement). On the downside, first support is located at 1.0860 (Fibonacci 38.2% retracement) ahead of 1.0815 (200-period Simple Moving Average (SMA), 100-period SMA) and 1.0800 (Fibonacci 23.6% retracement, psychological level).
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off 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 ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of 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 heads of the Eurozone national banks and six permanent members, including the President of the ECB, 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, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant 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 over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.