- France’s PM Sebastien Lecomu resigns, unsettling investors and renewing concerns over Eurozone political stability.
- US government shutdown enters sixth day; Trump warns layoffs possible if Senate vote fails to end standoff.
- Eurozone data mixed: Retail Sales slow while Sentix sentiment shows slight recovery from September pessimism.
EUR/USD retreats during the North American session sponsored by political turmoil in France and US Dollar strength, amid the sixth day of government shutdown in the US. The pair trades at 1.1714, down 0.24%.
Euro weakens toward 1.17 as Lecomu’s resignation and prolonged US fiscal gridlock bolster safe-haven demand for the Greenback
Market mood remains positive, as portrayed by Wall Street, but the shared currency depreciates on news that the French Prime Minister Sebastien Lecomu submitted his resignation. The lack of news about negotiations regarding the re-opening of the US government leaves traders leaning on economic data from Europe and speeches by central bank officials.
The US economic docket will feature the University of Michigan (UoM) Consumer Sentiment survey on Friday. This and the tone of discussions between the White House and Democrats, could set the stage to the release of delayed data in the US.
Recently, US President Donald Trump said that layoffs could be triggered if the Senate vote on the shutdown fails, adds negotiations are ongoing with Democrats.
The Financial Times reported that the European Commission intends to propose tariffs of 50% on steel imports worldwide above a quota set at 2013 levels.
Earlier, economic data in the Eurozone revealed that Retail Sales slowed in August on year-over-year figures. At the same time, the Eurozone Sentix index in October improved slightly, compared to September’s excessive pessimism.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.03% | -0.06% | -0.00% | -0.00% | 0.05% | -0.09% | |
| EUR | -0.03% | 0.02% | -0.05% | -0.02% | -0.00% | 0.04% | 0.02% | |
| GBP | -0.03% | -0.02% | -0.06% | -0.04% | 0.02% | -0.02% | -0.01% | |
| JPY | 0.06% | 0.05% | 0.06% | 0.05% | 0.06% | -0.01% | -0.09% | |
| CAD | 0.00% | 0.02% | 0.04% | -0.05% | -0.02% | 0.00% | 0.03% | |
| AUD | 0.00% | 0.00% | -0.02% | -0.06% | 0.02% | -0.11% | -0.03% | |
| NZD | -0.05% | -0.04% | 0.02% | 0.00% | -0.01% | 0.11% | -0.07% | |
| CHF | 0.09% | -0.02% | 0.00% | 0.09% | -0.03% | 0.03% | 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: The Euro hovers around 1.1700
- As of writing, the Kansas City Fed President Jeffrey Schmid said that the Fed must maintain inflation credibility and that inflation is too high. He added that monetary policy is appropriately calibrated.
- Eurozone Retail Sales in August rose by 1% YoY down from 2.2% in July yet mostly aligned with estimates of the previous twelve months. On a monthly basis, figures rose as expected 0.1%, up from August’s -0.5% MoM contraction.
- The Sentix Index in EZ improved from -9.2 to -5.4, better than the expected -8.5
- Money markets are fully pricing a 25-basis-point Fed cut at the October 29 meeting, with odds standing at 94%, according to Prime Market Terminal’s interest rate probability tool.
Technical outlook: EUR/USD holds firm waiting for a fresh catalyst
The EUR/USD remains subdued at around the 1.1700 mark for the sixth consecutive day, capped on the upside by the 20-day Simple Moving Average (SMA) at 1.1745 and on the downside by the 50-day SMA at 1.1683. Nevertheless, it should be noted that for two straight trading days, the pair achieved successive series of lower highs and hit a two-week low of 1.1651.
For a bullish continuation, the EUR/USD must clear 1.1760 before testing 1.1800. Once cleared the next resistance would be the July 1 high of 1.1830 ahead of testing the yearly peak at 1.1918.
Contrarily, the EUR/USD first support would be 1.1700, the 50-day SMA and the 100-day SMA at 1.1625.
Euro FAQs
The Euro is the currency for the 19 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.