- EUR/USD pair highly rises to approximately 1.0500 with optimism of the euro area preliminary The data of the Purchase Manager Index for January has strengthened the euro.
- It is widely expected that the European Central Bank will reduce the interest rate on deposit facilities by 25 basis points to 2.75% on Thursday.
- Trump’s call to reduce interest rates immediately and its soft dialect towards China has greatly affected the US dollar.
EUR/USD’s pair rose to approach psychological resistance at 1.0500 on Friday, when Hamburg Commercial Bank (HCOB) reported that the initial complex purchasing managers index in the eurozone (PMI) grew in January after its shrinkage in the past two months. The Flash HCob PMI report, prepared by the S&P Global, showed that the general trade activity expanded. The complex purchasing managers index rose to 50.2 from 49.6 in November. Economists expect that the purchasing managers index will continue to decline, but at a slower pace to 49.7.
“The beginning of the new year is somewhat encouraging. The complex indicator jumped to the expansion area. Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: “On the other hand, the French economy remained in a state of contraction.”
The report also showed a strong demand for employment and new work in the service sector. Meanwhile, the manufacturing sector is still suffering from the demobilization of workers and low new orders.
The optimistic purchasing managers index in the euro area improved the EUR in the short term, but it is unlikely to fix its wider weak expectations against the background of the strong Battles of the European Central Bank (ECB). The European Central Bank is preparing to reduce the interest rate on deposit facilities by 25 basis points to 2.75 % on Thursday and will continue to follow the process in the next three policy meetings, as officials are confident that inflationary pressures will be sustainable to the desired rate. From 2%.
US dollar price today
The table below shows the percentage of change in the US dollar (USD) against the main currencies listed today. The US dollar was the strongest against the Japanese yen.
| US dollar | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollar | -57% | -47% | 0.20% | -0.22% | -0.40% | -53% | -06% | |
| euro | 0.57% | 0.09% | 0.79% | 0.35% | 0.17% | 0.03% | 0.50% | |
| GBP | 0.47% | -0.09% | 0.70% | 0.26% | 0.07% | -06% | 0.40% | |
| JPY | -0.20% | -0.79% | -0.70% | -0.44% | -63% | -0.76% | -29% | |
| Canadian | 0.22% | -0.35% | -26% | 0.44% | -19% | -0.31% | 0.15% | |
| Australian dollar | 0.40% | -0.17% | -07% | 0.63% | 0.19% | -0.12% | 0.31% | |
| New Zealand dollar | 0.53% | -03% | 0.06% | 0.76% | 0.31% | 0.12% | 0.45% | |
| Swiss franc | 0.06% | -0.50% | -0.40% | 0.29% | -0.15% | -0.31% | -0.45% |
The thermal map shows the percentage of changes in the main currencies against each other. The basic currency is chosen from the left column, while the corresponding currency is chosen from the top row. For example, if you choose the US dollar from the left column and move along the horizontal line to the Japanese yen, the percentage of the change offered in the box will represent the US dollar (the basis)/Japanese yen (price offer).
Daily Summary of Market Motors: EUR/USD’s pair, with Trump’s retreat from raising customs tariffs on China
- UUR/USD pair is reinforcing the US dollar risk (USD) significantly. The US dollar index (DXY), which tracks the value of the American currency, fell by six main currencies, near 0.6 % on Friday and recorded its lowest level in five weeks near 107.45. The risk bonus of the US dollar has decreased significantly, as US President Donald Trump indicated that he may reach an agreement with China without using customs tariffs.
- The dollar has increased by almost 10 % since October, in part due to the market expectations that President Trump will impose fatal definitions on his commercial partners shortly after his return to the White House. During the election campaign, Trump commented that if he wins, he will impose a 60% customs duties on China and 25% on other North American economies.
- President Trump said in an interview with Fox News on Thursday that he had a friendly conversation with Chinese leader Xi Jinping and could reach an agreement on commercial practices. Trump added that he prefers not to use customs duties against China, but he described customs duties as a “tremendous force,” Reuters said.
- In addition to Trump’s assumption of reducing customs tariffs on China, his support for immediate discounts in interest rates in his comments at the World Economic Forum (WEF) in Davos on Thursday has also led to the decline in the US dollar.
- From now on, the main catalyst for the US dollar will be the monetary policy of the Federal Reserve, which will be announced on Wednesday. It is almost certain that the Federal Reserve will keep interest rates unchanged in the range of 4.25 % -4.50 %. Investors will pay close attention to the Conference of the Federal Reserve President Jerome Powell to determine whether officials agree with President Trump’s views.
Technical Analysis: EUR/USD is strengthened by negative divergence
EUR/USD pair registered a new monthly level near 1.0500 on Friday. The main currency pair is strengthened after hacking over the SIA moving average for 50 days (EMA), which is trading around 1.0456, on Monday. The husband has continued to attract purchase requests since he decreased to his lowest level in more than two years at 1.0175 on January 13.
This husband entered into a bullish reflection path after penetrating the highest level of his record on January 6 at 1.0430, which confirmed the difference in the price of the original and the relative power index over the 14 days (RSI). On January 13, the relative strength index formed a higher bottom, while the husband recorded lower bottoms.
Looking down, the lowest level for January 20 at 1.0266 will be the main support area of the husband. On the contrary, the highest registered price on December 6 at 1.0630 will be the main barrier in front of the height of the euro.
Common questions for the European Central Bank
The European Central Bank (ECB) in Frankfurt, Germany, is the backup bank. The European Central Bank determines interest rates and runs the region’s monetary policy. The basic mandate of the European Central Bank is to maintain price stability, which means keeping inflation at approximately 2%. The basic tool to achieve this is to raise or reduce interest rates. Relatively high interest rates usually lead to the strength of the euro and vice versa. The European Central Bank Governors Council makes monetary policy decisions at eight times a year. Decisions are made by the heads of national banks in the euro zone and the six -party members, including the European Central Bank President, Christine Lagarde.
In extreme situations, the European Central Bank can activate a political tool called quantitative facilitation. The quantitative facilitation is the process through which the European Central Bank prints the euro and its use to buy assets – usually government bonds or bonds of corporate – from banks and other financial institutions. Quantitative facilitation usually leads to euro twice. The quantitative facilitation is the last resort when it is unlikely to reduce interest rates simply achieve the goal of stabilizing prices. The European Central Bank used it during the major financial crisis in the period 2009-2011, and in 2015 when inflation remained stubbornly low, as well as during the Corona virus pandemic.
The quantitative tightening (QT) is the opposite of quantitative facilitation. It is implemented after quantitative facilitation when economic recovery is ongoing and inflation begins to rise. While the European Central Bank (ECB) in the quantitative facilitation program purchases government bonds and companies from financial institutions to provide them with liquidity, in the QT program, the European Central Bank stops buying more bonds, and stops re -investing the capital due to the bonds that they keep actually. It is usually positive (or bullish) for the euro.