Euro/US dollar is heading about 1.0450, as it strengthens the US dollar amid the increasing treasury revenues
- The euro/the US dollar decreases, as the US dollar strengthens after three consecutive sessions of losses.
- Federal Reserve Governor Michelle Bowman has warned that the risk of upscale inflation is continuing, stressing the need for more clarity before considering price cuts.
- The euro faces a decline in the expectations of the European Central Bank of three additional price cuts this year.
EUR/USD extends its losses in the second consecutive session, as it is traded near 1.0460 during the Asian hours on Tuesday. This negative aspect can be attributed to the beneficial US dollar (USD) amid a high treasury revenue.
The US dollar index (DXY), which tracks the performance of the US dollar for six main currencies, is higher after registering the losses in the previous three sessions and trading around 106.90, while the return on US Treasury bonds for two years, 10 years 4.27 % and 4.51 %, on Delivery, at the time of writing this report.
Federal Reserve Governor Michelle Bowman said on Monday that high asset prices may slow the recent progress made by the Federal Reserve in inflation. While Bowman expects inflation to decrease, she warned that upward risks remain and emphasize the need for more certainty before considering price cuts.
Meanwhile, the governor of the Federal Reserve, Christopher Waller, has admitted late on Monday that despite the improvement of inflation, the progress was slow “slow”. Waller emphasized that the Federal Reserve should not allow the uncertainty in politics to impeding data -based decisions.
The euro faces the declining pressure as many European Central Bank officials (ECB) are still comfortable with expectations of three other price cuts this year, following 25 basis points to 2.75 % last month.
However, the euro can get support if a ceasefire is reached in Ukraine and the resumption of gas supplies. JP Morgan notes that the EUR/USD pair can be estimated at up to 5 % under these circumstances.
Reports indicate that US President Donald Trump and Russian President Vladimir Putin agreed to start negotiations to end the conflict. Officials from the Trump administration are scheduled to meet with their Russian counterparts in the Kingdom of Saudi Arabia on Tuesday to discuss a possible peace agreement.
Common questions euro
The euro is the currency of the 19 European Union countries belonging to the eurozone. It is the second most traded currency in the world behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily rotation of more than $ 2.2 trillion per day. EUR/USD is the most trading currency pair in the world, which represents an estimated 30 % of all transactions, followed by EUR/JPY (4 %), EUR/GBP (3 %) and EUR/AUD (2 %).
The European Central Bank (ECB) in Frankfurt, Germany, is the backup bank. The European Central Bank sets interest rates and runs monetary policy. The primary mandate in the European Central Bank is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary performance is to raise or reduce interest rates. Relatively high interest rates – or expect higher rates – usually benefit from the euro and vice versa. The Board of Directors of the European Central Bank is making monetary policy decisions at eight times a year. Decisions are made by the heads of national banks in the eurozone and six permanent members, including the President of the European Central Bank, Christine Lagarde.
The inflation data in the euro area, measured by a coordinated index of consumer prices (HICP), is an important economist for the euro. If inflation increases more than expected, especially if it is 2 % higher than the European Central Bank’s goal, then the European Central Bank is obliged to raise interest rates to return it in control. Relatively high interest rates usually benefit compared to its euro counterparts, as it makes the region more attractive as a place for global investors to stop their money.
Data ejaculates a measurement of economics health and can affect the euro. Indicators such as GDP, manufacturing, PMIS, employment services, and consumer morale surveys can affect the trend of uniform currency. The strong economy is useful for the euro. Not only is to attract more foreign investment, but the European Central Bank may encourage interest rates, which will enhance the euro directly. Otherwise, if economic data is weak, the euro is likely to decrease. Economic data of the four economies in the eurozone (Germany, France, Italy and Spain) are of particular importance, because it represents 75 % of the eurozone economy.
Other important version of the euro is the commercial balance. This indicator measures the difference between what a country gains from its exports and what it spends on imports during a certain period. If a country produces very absolute after exports, its currency will obtain a purely value of the additional demand created from foreign buyers who seek to buy these goods. Therefore, the positive and positive trade balance enhances the currency and vice versa to achieve a negative balance.
