• EUR/USD extends gains as US Dollar weakens after mixed US data.
  • The Euro could face challenges as markets speculate over an ECB interest rate cut in June.
  • The expected decline in US Nonfarm Payrolls could further weaken the US Dollar.

The EUR/USD pair extends its gains for the second consecutive day, edging higher to near 1.0880 during the European session on Friday. EUR/USD gained upward support following mixed economic data from the United States (US). Further, the subdued US Treasury yields contribute to adding pressure on the US Dollar (USD). US Treasury yields experienced downward pressure following reports from regional bank New York Community Bancorp, which indicated increased stress in its commercial real estate portfolio.

The Euro faced a decline following the release of softer German consumer inflation data on Wednesday, as market sentiment leaned towards the possibility of a speculative interest rate cut by the European Central Bank (ECB) in June. However, the European currency initiated a recovery after the release of mixed Eurozone inflation data on Thursday.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against a basket of six major currencies, struggles to retrace its recent losses. The DXY trades around 103.00, with the 2-year and 10-year US Treasury yields hovering around 4.23% and 3.88%, respectively, at the time of writing.

US Initial Jobless Claims rose to 224K for the week ending on January 26, exceeding both the previous increase of 215K and the expected figure of 212K. However, ISM Manufacturing PMI improved to 49.1 from the prior reading of 47.1, surpassing the anticipated figure of 47.0 in January. On Friday, key labor data is set to be released, including US Average Hourly Earnings and Nonfarm Payrolls (NFP).

Daily digest market movers: EUR/USD extends gains after mixed US economic data

  • Eurozone preliminary Core Harmonized Index of Consumer Prices (YoY) increased by 3.3% in January, higher than the expected 3.2% growth but lower than the 3.4% prior.
  • The annual Consumer Price Index came in at 2.8%, as expected, against the previous reading of 2.9%. The month-over-month report showed a decline of 0.4%, swinging from the 0.2% rise in December.
  • German Consumer Price Index (CPI) for January showed a year-on-year increase of 2.9%, lower than the expected 3.3% and down from December’s reading of 3.7%.
  • Germany’s consumer inflation met expectations, rising to 0.2% MoM from the previous reading of 0.1%. The Harmonized Index of Consumer Prices YoY increased 3.1%, lower than the previous figure of 3.8%.
  • The preliminary US Nonfarm Productivity increased by 3.2% in Q4, higher than the expected 2.5%, but down from the previous reading of 4.9%.
  • US Challenger Job Cuts rose to 82,307 in January from the previous 34,817 in December.
  • US Unit Labor Costs reported a 0.5% rise against the 1.7% expected in the fourth quarter, swinging from the previous 1.1% decline.

Technical Analysis: EUR/USD moves higher towards psychological barrier at 1.0900

EUR/USD advances to near 1.0880 on Friday, close to the immediate resistance around the psychological level at 1.0900. A breakthrough above the latter could exert upward pressure on the pair to surpass the 38.2% Fibonacci retracement level at 1.0915 to navigate the next barrier around the major level at 1.0950.

On the downside, the major level at 1.0850 appears as the key support, which is aligned with the 21-day Exponential Moving Average (EMA) at 1.0846. A break below this region could push the EUR/USD pair to approach the psychological support at 1.0800, followed by the weekly low at 1.0779.

EUR/USD: Four-Hour Chart

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 -0.42%-0.51%-0.64%-0.39%-0.99%-1.05%-0.93%
EUR0.42% -0.09%-0.21%0.04%-0.55%-0.64%-0.52%
GBP0.51%0.09% -0.13%0.12%-0.46%-0.56%-0.43%
CAD0.64%0.21%0.13% 0.26%-0.33%-0.40%-0.29%
AUD0.39%-0.04%-0.12%-0.25% -0.59%-0.67%-0.55%
JPY0.97%0.55%0.62%0.33%0.61% -0.09%0.04%
NZD1.06%0.65%0.57%0.43%0.68%0.08% 0.11%
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).


What is the ECB and how does it influence the Euro?

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.

What is Quantitative Easing (QE) and how does it affect the Euro?

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.

What is Quantitative tightening (QT) and how does it affect the Euro?

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.

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