Main Highlights
- EUR/USD is trading higher, influenced by easing US-China trade tensions and potential Federal Reserve interest rate cuts.
- Positive sentiment from a US-Japan rare earths agreement and optimistic trade outlook with China is supporting risk appetite.
- Softer US inflation data suggests a 25 basis point Fed rate cut is likely, with markets anticipating hints of further easing.
- Technical analysis indicates short-term bullish trend for EUR/USD, with key resistance levels at 1.1670 and 1.1730.
EUR/USD Gains Momentum Amid Easing Trade Tensions and Fed Speculation
The EUR/USD currency pair is showing upward momentum, marking its fifth consecutive day of gains and trading slightly above the 1.1650 level. This positive trend is attributed to the initial signs of de-escalation in trade disputes between the United States and China, a significant rare earths supply agreement with Japan, and the market’s expectation that the Federal Reserve will implement further interest rate cuts this week. These factors are collectively boosting investor risk appetite and putting pressure on the typically safe-haven US Dollar (USD).
💡 The development signifies a shift in market sentiment away from risk aversion, benefiting the Euro against the weakening Dollar.
US President Donald Trump has been actively engaged in diplomatic efforts during his Asia tour. His recent agreement with Japan aims to secure the supply of critical rare earth minerals. Furthermore, Trump has maintained an optimistic tone regarding trade relations with China, expressing confidence in reaching a favorable deal with President Xi Jinping. Earlier this week, US Treasury Secretary Scott Bessent indicated that the threat of a 100% tariff on Chinese goods has been removed from the table, following China’s agreement to postpone restrictions on rare earths during weekend talks in Malaysia.
📈 The market is closely watching geopolitical developments that could impact currency valuations.
Federal Reserve Policy and US Economic Data in Focus
The softer-than-expected inflation data released in the US last week has significantly increased the probability of a 25 basis point rate cut by the Federal Reserve on Wednesday. Despite the ongoing US government shutdown, now in its fifth week, which limits the availability of key macroeconomic data to inform the Fed’s decisions, markets are anticipating guidance from the central bank that hints at a potential third rate cut in December. Any failure to signal further easing could lead to a notable recovery for the US Dollar.
📊 Upcoming economic indicators like the US Housing Price Index and Consumer Confidence data may offer some direction for US Dollar pairs. However, a substantial recovery for the USD appears unlikely as long as investor appetite for risk remains robust.
Euro Performance Amidst Mixed Economic Signals
The positive market sentiment continues to provide support for the Euro (EUR), outpacing the safe-haven status of the US Dollar. This is occurring despite some less-than-ideal economic releases from the Eurozone, such as the German GFK Consumer Confidence Index, which declined more than anticipated in November.
The German GfK research institute reported that consumer confidence in Germany fell to -24.1 in November. This marks the lowest reading in seven months, a decrease from -22.3 in September, and fell short of market expectations for a slight improvement to -22.0.
📊 The European Central Bank’s (ECB) survey indicated a slight easing in consumers’ inflation expectations for the next 12 months, dropping to 2.7% in September from 2.8% in August. Expectations for three and five-year horizons remained stable at 2.5% and 2.2%, respectively. The impact of this survey on the Euro has been minimal.
Technical Outlook for EUR/USD
EUR/USD is currently exhibiting a short-term bullish trend, emerging from the lows seen last week around 1.1580. The pair has appreciated consistently over the past five trading sessions. However, momentum indicators on the 4-hour chart suggest that the trend’s strength may be fragile. The Relative Strength Index (RSI) remains in positive territory above 50, but the Moving Average Convergence Divergence (MACD) is displaying short green histogram bars.
Key Resistance and Support Levels
Price action is contained within previous trading ranges. The high from October 20, at 1.1675, presents an immediate obstacle, potentially limiting further gains towards the October 17 highs, which are in the vicinity of 1.1730. A decisive breach above this level would be necessary to confirm a sustained bullish trend and target the October 1 high, near 1.1780.
📍 On the downside, the low recorded on Monday near the 1.1620 area serves as the primary support. Below this, the October 22 low near 1.1575 is a key level, followed by the critical support zone around 1.1545, which encompasses the lows from October 9 and 14.
Central Bank Roles in Economic Stability
Central banks play a crucial role in maintaining price stability within a country or region. They are tasked with managing inflation and deflation, which are fluctuations in the general price level of goods and services. The primary objective for major central banks, including the US Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE), is to keep inflation closely aligned with a target of approximately 2%.
Monetary Policy Tools and Interest Rates
The principal tool available to a central bank for influencing inflation is its benchmark policy rate, commonly referred to as the interest rate. At scheduled intervals, central banks release statements detailing their policy rate decisions and the rationale behind them, whether maintaining the current rate or adjusting it through cuts or hikes. These decisions have a ripple effect, influencing the rates offered by commercial banks for savings and loans, thereby impacting borrowing costs for businesses and potential investment activities.
⚡ A significant increase in interest rates is termed ‘monetary tightening,’ while a reduction is known as ‘monetary easing.’
Political Independence and Policy Stances
Central banks typically operate with a degree of political independence. Members of their policy boards undergo rigorous selection processes, often involving hearings and panel reviews. Each board member may hold distinct views on the optimal approach to inflation control and monetary policy. Individuals who advocate for a more accommodative monetary policy, characterized by lower interest rates and accessible credit to stimulate economic growth, even at the risk of slightly exceeding the inflation target, are often referred to as ‘doves.’ Conversely, those who prioritize higher rates to reward savers and maintain strict inflation control are labeled ‘hawks,’ aiming to keep inflation at or below the 2% target.
Leadership and Communication in Monetary Policy
A chairman or president typically leads central bank meetings, working to foster consensus among board members with differing views. In the event of a tie vote, the chairman holds the deciding vote. The chairman’s speeches and public appearances often provide insights into the current monetary stance and future outlook, which can be followed live by the markets. Central banks strive to implement their monetary policies without causing excessive volatility in currency, equity, or interest rate markets.
📌 Leading up to policy meetings, central bank members are typically restricted from public commentary, a period known as the ‘blackout period,’ ensuring that their communication channels are unified once the new policy is announced.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | 0.16% | -0.64% | 0.06% | 0.04% | 0.00% | -0.23% | |
| EUR | 0.10% | 0.27% | -0.53% | 0.16% | 0.15% | 0.08% | -0.13% | |
| GBP | -0.16% | -0.27% | -0.77% | -0.11% | -0.12% | -0.17% | -0.41% | |
| JPY | 0.64% | 0.53% | 0.77% | 0.69% | 0.67% | 0.63% | 0.39% | |
| CAD | -0.06% | -0.16% | 0.11% | -0.69% | -0.03% | -0.06% | -0.30% | |
| AUD | -0.04% | -0.15% | 0.12% | -0.67% | 0.03% | -0.04% | -0.28% | |
| NZD | -0.00% | -0.08% | 0.17% | -0.63% | 0.06% | 0.04% | -0.24% | |
| CHF | 0.23% | 0.13% | 0.41% | -0.39% | 0.30% | 0.28% | 0.24% |
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).
Expert Summary
The EUR/USD is experiencing an upward trend, supported by a more positive global risk sentiment stemming from eased US-China trade tensions and a US-Japan rare earths agreement. Expectations of a Federal Reserve rate cut further bolster this trend, although technical indicators suggest caution. Key economic data releases from the US are anticipated to provide direction.