EUR/USD gathers strength to near 1.1400 ahead of German data, US PCE releases
- EUR/USD trades in positive territory around 1.1390 in Wednesday’s early Asian session.
- US job openings fell to 7.19 million in March, the lowest since September 2024.
- Traders brace for the German Retail Sales, CPI, and GDP data, followed by the US PCE report, which is due on Wednesday.
The EUR/USD pair gains ground to near 1.1390 during the early Asian session on Wednesday. The US Dollar (USD) edges lower against the Euro (EUR) due to softer-than-expected US economic data. The German economic data and US Personal Consumption Expenditures - Price Index (PCE) report for March will be in the spotlight later on Wednesday.
US job openings fell last month to the lowest since September 2024, indicating weaker labor demand amid increased economic uncertainty, according to the US Bureau of Labor Statistics on Tuesday. The figure declined to 7.19 million in March from a revised 7.48 million in February, below the market consensus of 7.5 million.
Meanwhile, the Conference Board’s Consumer Confidence Index fell sharply to 86.0 in April from the previous reading of 93.9 (revised from 92.9), its lowest reading since April 2020. This report suggested the weakening of the US economy. The chance of a rate cut from the US Federal Reserve (Fed) jumped to 56.8% after weaker-than-expected labor and sentiment data increased concerns about economic momentum. This, in turn, has dragged the Greenback lower and acts as a tailwind for the major pair.
Traders will closely watch the release of Retail Sales, Consumer Price Index (CPI) and the advanced estimate of Q1 Gross Domestic Product (GDP) from Germany. Also, the preliminary Q1 GDP Growth Rate for the Eurozone will be released on the same day. If the reports show a stronger-than-expected outcome, this could lift the shared currency in the near term. currency in the near term.
Euro FAQs
The Euro is the currency for the 19 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.