EUR/USD drops for the fourth straight day on Thursday as jobs economic data fared better than expected. Data in the Eurozone reaffirmed traders that the European Central Bank easing cycle finished, as producer prices in the bloc deflated in December. At the time of writing, the pair trades at 1.1652. down 0.19%.
The Euro weakens as upbeat US labor indicators overshadow softer Eurozone data
Market participants are turning to the Dollar ahead of the US Nonfarm Payrolls report, in part due to strong jobs market data. On Wednesday, ADP figures were solid while the Challenge Job Cuts report for December showed that companies fired less people than in November.
The data was followed by US jobless claims, which showed that fewer than expected Americans applied for unemployment benefits.
Consequently, the US Dollar Index (DXY), which tracks the buck’s performance against a basket of currencies, has risen 0.19% up at 98.91, surpassing the key technical 200-day Simple Moving Average (SMA) level, which lies at 98.87. A daily close above the latter could propel the DXY, above the 99.00 mark.
Dovish comments of Fed Governor Stephen Miran were mostly ignored by market participants, which had priced in two rate cuts, according to Prime Market Terminal data. in the meantime, the US Treasury Secretary Scott Bessent pressured Federal Reserve officials, saying that they should not delay interest rate cuts, to propel economic growth.
In Europe, the docket was packed, with inflation continuing to ease and Consumer Confidence improving. However, the Economic Sentiment Indicator deteriorated in December, due to service providers, retailers and consumers.
Ahead the Eurozone economic docket will feature Retail Sales for the bloc, comments from ECB’s Philip Lane, and German Industrial Production data. in the US, the calendar will feature Nonfarm Payrolls, the release of the Unemployment Rate, the University of Michigan Consumer Sentiment and housing data.
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 Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.56% | 0.17% | 0.02% | 0.86% | -0.34% | 0.15% | 0.81% | |
| EUR | -0.56% | -0.39% | -0.48% | 0.29% | -0.90% | -0.41% | 0.26% | |
| GBP | -0.17% | 0.39% | -0.19% | 0.70% | -0.51% | -0.02% | 0.66% | |
| JPY | -0.02% | 0.48% | 0.19% | 0.81% | -0.38% | 0.11% | 0.83% | |
| CAD | -0.86% | -0.29% | -0.70% | -0.81% | -1.03% | -0.70% | -0.03% | |
| AUD | 0.34% | 0.90% | 0.51% | 0.38% | 1.03% | 0.49% | 1.17% | |
| NZD | -0.15% | 0.41% | 0.02% | -0.11% | 0.70% | -0.49% | 0.68% | |
| CHF | -0.81% | -0.26% | -0.66% | -0.83% | 0.03% | -1.17% | -0.68% |
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).
Daily digest market movers: Euro weighed by US jobs data
- US Initial Jobless Claims for the week ending January 3 came in at 208K, below forecasts of 210K, though slightly higher than the prior week’s 200K, according to the U.S. Department of Labor.
- The data reinforces signs of a gradually improving labor market, following the December Challenger Job Cuts report from Challenger, Gray & Christmas, which showed employers announced 35,553 layoffs, nearly half of November’s 71,321.
- The US Goods and Services Trade Balance showed a sharp improvement in October, with the deficit narrowing to $29.4 billion from $48.1 billion, defying expectations for a widening to $58.9 billion. The surprise improvement was driven by a steep decline in imports, particularly in pharmaceuticals.
- The Federal Reserve Bank of New York Survey of Consumer Expectations (SCE) indicated a mixed outlook among households. Short-term inflation expectations ticked higher, while medium- and long-term expectations remained unchanged.
- One-year inflation expectations rose to 3.4% in December from 3.2%, while expectations over three- and five-year horizons held steady at 3.0%, signaling persistent but contained inflation concerns beyond the near term.
- In the Eurozone, the Producer Prices Index (PPI) accelerated to 0.5% from 0.1% in October, beyond market expectations of a 0.2% increase. Year-on-year, producer prices contracted at a 1.7% pace from -0.5% in October, but still at a slower pace than -1.9% forecasted by market analysts.
- Other data showed that the Consumer Confidence and the Business Climate in December improved. German Factory Orders for November, exceeding estimates of 1%, rose by 5.6% MoM, from 1.6% in October.
Technical outlook: EUR/USD prolongs its agony as traders eye the 200-day SMA
EUR/USD technical outlook weakened further and it seems poised to end the session below Wednesday’s low of 1.1672. The Relative Strength Index (RSI) shows that the trend is neutral to downward, but sellers need to push the pair below the key support seen at the 200-day SMA at 1.1561.
On the downside, initial support is found at the 50-day SMA at 1.1640, followed by the 200-day SMA around 1.1561. To revive the bullish case, buyers would need to reclaim 1.1700, followed by the 20-day SMA at 1.1733.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the 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.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
