- EUR/USD touches a fresh weekly high on Thursday, albeit lacks follow-through buying.
- Hawkish Fed expectations revive the USD demand and act as a headwind for the major.
- ECB rate cut bets further undermine the Euro and support prospects for deeper losses.
The EUR/USD pair fails to preserve its modest intraday gains back closer to the 1.0800 mark, a fresh weekly top, and trades in neutral territory during the first half of the European session on Thursday. Firming expectations that the European Central Bank (ECB) will cut interest rates at the start of the second quarter overshadow the recent hawkish remarks by Governing Council members and continue to undermine the Euro. This, along with the emergence of some US Dollar (USD) buying, acts as a headwind for the currency pair.
Against the backdrop of the Federal Reserve’s (Fed) less dovish outlook on interest rates, a slew of influential FOMC members pushed back against market bets for more aggressive policy easing in 2024. This remains supportive of elevated US Treasury bond yields and assists the USD in stalling this week’s retracement slide from its highest level in almost three months. That said, hopes for an imminent shift in the Fed’s policy stance, along with the underlying bullish tone around the equity markets, might cap any further gains for the safe-haven buck.
This makes it prudent to wait for some follow-through selling before positioning for the resumption of the EUR/USD pair’s recent downward trajectory witnessed over the past month or so. Traders now look to the release of the US Weekly Initial Jobless Claims data, which, along with scheduled speeches by Richmond Fed President Thomas Barkin, might drive the USD. The focus, however, remains on the US consumer inflation figures due next week, which will influence the Fed’s future policy decisions and provide some meaningful impetus to the major.
Daily Digest Market Movers: Loses traction amid reviving USD demand, dovish ECB expectations
- The EUR/USD pair stalls its recovery move from almost a three-month low touched earlier this week amid the emergence of some US Dollar dip-buying on Thursday.
- The US bond yields remain elevated amid reduced bets for early and steep interest rate cuts by the Federal Reserve in 2024 and help revive demand for the Greenback.
- Several FOMC members, including Fed Chair Jerome Powell, don’t see an urgent case for lowering borrowing costs, suggesting that a rate cut isn’t likely until the May meeting.
- Powell smashed any remaining hopes for a March rate cut and said on Sunday that the central bank can be prudent in deciding when to start easing on the back of a strong economy.
- Federal Reserve Board Member Adriana Kugler said on Wednesday that she is optimistic that inflation progress will continue, but stopped short of offering a timeline of the rate-easing cycle.
- Boston Fed President Susan Collins noted that inflation has slowed faster than expected but added that the central bank wants more certainty before it starts cutting rates.
- Minneapolis Fed President Neel Kashkari said that officials would like to see a few more months of inflation data and added that two to three cuts will be appropriate for 2024.
- Richmond Fed President Tom Barkin said that it is a good idea for the central bank to take its time with rate cuts given the uncertainty about where the US economy is headed.
- The markets, however, are still pricing in five rate cuts over the course of the seven remaining FOMC meetings this year, which might cap any further gains for the US Dollar.
- As inflation in the Eurozone moves closer to 2%, the first European Central Bank interest rate cut is expected to occur earlier than expected, possibly in the next quarter.
- Thursday’s US economic docket features the release of the usual Weekly Initial Jobless Claims, which, along with Fedspeak, will influence the USD and provide a fresh impetus.
Technical Analysis: Bulls still seem to have the upper hand while below the 100-day SMA
From a technical perspective, the EUR/USD pair continues with its struggle to make it through the 100-day Simple Moving Average (SMA). Adding to this, the intraday pullback from the vicinity of the 1.0800 mark suggests that the recent downtrend from the December monthly swing high is still far from being over. That said, it will still be prudent to wait for some follow-through selling before positioning for any further decline.
In the meantime, the 1.0745-1.0740 area is likely to protect the immediate downside ahead of the 1.0725-1.0720 region, or the multi-month low, and the 1.0700 mark. A convincing break below the latter will be seen as a fresh trigger for bearish traders and make the EUR/USD pair vulnerable to accelerate the slide further towards the 1.0665-1.0660 support. Spot prices could eventually drop to the 1.0620-1.0615 region and the 1.0600 round figure.
On the flip side, momentum beyond the 1.0800 mark is likely to meet with a fresh supply near the very important 200-day SMA, currently pegged near the 1.0830-1.0835 region. This is closely followed by a one-month-old descending trend line, around mid-1.0800s. A sustained strength beyond the latter might shift the near-term bias in favor of bulls and prompt aggressive short-covering around the EUR/USD pair, allowing it to reclaim the 1.0900 mark.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.01% | -0.03% | -0.04% | -0.09% | 0.17% | -0.75% | 0.64% | |
| EUR | 0.01% | -0.05% | -0.02% | -0.09% | 0.18% | -0.74% | 0.65% | |
| GBP | 0.04% | 0.02% | -0.01% | -0.06% | 0.20% | -0.71% | 0.67% | |
| CAD | 0.04% | 0.03% | 0.00% | -0.05% | 0.21% | -0.71% | 0.68% | |
| AUD | 0.09% | 0.09% | 0.06% | 0.06% | 0.26% | -0.66% | 0.73% | |
| JPY | -0.17% | -0.19% | -0.22% | -0.20% | -0.25% | -0.92% | 0.47% | |
| NZD | 0.74% | 0.73% | 0.71% | 0.71% | 0.65% | 0.90% | 1.38% | |
| CHF | -0.65% | -0.65% | -0.68% | -0.68% | -0.74% | -0.48% | -1.40% |
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).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Source: https://www.fxstreet.com/news/eur-usd-remains-capped-near-100-day-sma-amid-emergence-of-usd-dip-buying-202402080953