- EUR/USD drops to a fresh YTD low and is pressured by a combination of factors.
- The USD builds on the post-NFP rise and touches its highest level since December.
- Bets for an April rate cut by the ECB continue to undermine the shared currency.
The EUR/USD pair remains under heavy selling pressure for the second straight day on Monday and drops to a fresh YTD low, around mid-1.0700s during the first half of the European session. The shared currency is undermined by hopes that the European Central Bank (ECB) could start cutting its benchmark deposit rate from the current record-high level of 4% by April. This, along with a bullish US Dollar (USD), overshadows an improvement in the Eurozone Sentix Investor Confidence Index to -12.9 in February from -15.8 in the previous month.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs to its highest level since December 11 as investors continue to scale back their expectations for a more aggressive policy easing by the Federal Reserve (Fed). This remains supportive of elevated US Treasury bond yields, along with geopolitical risks stemming from conflicts in the Middle East and China’s economic woes, which lends additional support to the buck. This is seen as another factor dragging the EUR/USD pair lower and supports prospects for deeper losses.
Daily Digest Market Movers: EUR/USD is dragged down by the post-NFP US Dollar rally to a fresh YTD peak
- The upbeat US jobs report points to a still-resilient US labor market and gives the Federal Reserve headroom to keep rates higher for longer, underpinning the US Dollar and exerting pressure on the EUR/USD pair.
- Furthermore, Fed Chair Jerome Powell, speaking in an interview with the US TV show 60 Minutes over the weekend, reiterated that the March meeting is likely too soon to have the confidence to start cutting interest rates.
- The probability of the first interest rate cut by the Fed in May stands at about 70%, down from 90% before the key employment data, and the probability of 150-bps of cumulative rate cuts in 2024 plummets to just around 20%.
- The yield on the benchmark 10-year US government bond extends the post-NFP rise beyond the 4.0% threshold on Monday and favours the USD bulls amid a slight deterioration in the global risk sentiment.
- Israel’s Prime Minister Benjamin Netanyahu said that the country will not end the war before it completes all of its goals, while media reports suggest that Hamas is set to reject the Gaza ceasefire deal proposed in Paris.
- The US Central Command said its forces conducted a strike in self-defence against a Houthi land-attack cruise missile and struck four anti-ship cruise missiles prepared to launch against ships in the Red Sea.
- A private survey showed that business activity in China’s services sector remained in expansionary territory for 13 straight months, though grew less than expected in January and added to slowdown concerns.
- Eurozone CPI moves slowed from the 2.9% YoY rate to 2.8% in January, moving closer to the 2% target and making it more likely that the European Central Bank will start cutting interest rates by April.
- ECB’s Governing Council member Boris Vujcic said that the central bank needs to ensure there aren’t any second-round effects on inflation from wages before cutting rates, though fails to inspire the Euro bulls.
- The US ISM Services PMI is due for release later today and is expected to improve from 50.6 to 52.0 in January, which, along with Fedspeaks, will influence the buck and provide some impetus to the currency pair.
Technical Analysis: EUR/USD acceptance below 100-day SMA might have already set the stage further losses
From a technical perspective, acceptance below the 100-day Simple Moving Average (SMA) will be seen as a fresh trigger for bearish traders. Given that oscillators on the daily chart are holding deep in the negative territory and are still away from being in the oversold zone, the EUR/USD pair might then slide to the December 2023 swing low, around the 1.0725-1.0720 region. This is closely followed by the 1.0700 mark, below which the downward trajectory could accelerate further towards the 1.0665-1.0660 intermediate support en route to the 1.0620-1.0615 region and the 1.0600 round figure.
On the flip side, any attempted recovery back above the 1.0800 mark is likely to attract fresh sellers and remain capped near the 200-day SMA, currently pegged near the 1.0835-1.0840 zone. A sustained strength beyond, however, might trigger a short-covering rally and allow the EUR/USD pair to reclaim the 1.0900 round figure. The latter should act as a key pivotal point, which if cleared decisively will negate the negative outlook and shift the near-term bias in favour of bullish traders.
Euro price today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.14% | 0.07% | 0.10% | 0.02% | -0.05% | -0.08% | 0.21% | |
| EUR | -0.16% | -0.09% | -0.05% | -0.14% | -0.21% | -0.24% | 0.05% | |
| GBP | -0.07% | 0.08% | 0.03% | -0.05% | -0.12% | -0.15% | 0.14% | |
| CAD | -0.10% | 0.03% | -0.03% | -0.08% | -0.16% | -0.18% | 0.10% | |
| AUD | -0.03% | 0.14% | 0.06% | 0.09% | -0.07% | -0.09% | 0.19% | |
| JPY | 0.04% | 0.20% | 0.11% | 0.17% | 0.07% | -0.04% | 0.26% | |
| NZD | 0.10% | 0.23% | 0.18% | 0.18% | 0.09% | 0.00% | 0.27% | |
| CHF | -0.21% | -0.05% | -0.14% | -0.11% | -0.18% | -0.26% | -0.29% |
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).
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.
The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger 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.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.
QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Source: https://www.fxstreet.com/news/eur-usd-languishes-near-ytd-low-as-traders-continue-to-trim-fed-rate-cut-bets-202402050925