EUR/USD consolidates near 1.1300 with the FOMC Minutes on the spotlight
- EUR/USD has bounced up from the 1.1300 area and is trading practically flat on the daily chart.
- The Dollar loses ground as investors grow cautious with the FOMC minutes on focus
- The Euro is under growing bearish momentum, with 1.1260 support in focus.
EUR/USD has regained lost ground during Wednesday’s European session. The pair found support at the 1.1300 area but remains unable to extend gains above 1.1340, with investors looking from the sidelines, awaiting the minutes of the Fed’s May meeting.
The US Dollar (USD) had been rallying across the board in previous sessions, supported by a significant recovery in US Consumer Confidence, which had been deteriorating for the previous six months. The survey also revealed that the percentage of Americans expecting a recession in the coming months declined.
These figures offset the decline in April’s US Durable Goods Orders, which highlights the negative impact of US President Donald Trump’s chaotic tariff policy on business and manufacturing.
Beyond that, market sentiment remains buoyed by Trump’s decision to delay levies on Eurozone products. The US Dollar Index (DXY) has bounced about 1% from one-month lows, as fears of a new front in the trade war and its potential impact on global economic growth have eased.
In the Eurozone, German Unemployment data and France’s Consumer Confidence have failed to impress, backing the comments by European Central Bank’s (ECB) officials François Villeroy and Klaas Knot that hinted towards further rate cuts after June’s monetary policy meeting.
Daily digest market movers: The Euro suffers against a firmer US Dollar
- Data from France released on Wednesday showed a weaker-than-expected recovery in Consumer Confidence in April, a 0.3% increase from a 1.1% decline in March, which came short of the market expectations of a 0.8% reading.
- Also in France, the Q1 Gross Domestic Product has confirmed the meagre 0.1% growth previously estimated, with Nonfarm Payrolls declining 0.1% against expectations of a flat reading.
- In Germany, the Unemployment rate has remained steady at 6.3%, with the net change in employment showing a 34K decline, more than three times the 11K expected. All in all, not the most supportive data for the Euro.
- On Tuesday, the US Conference Board’s Consumer Confidence Index improved to 98.0 in May, up from 85.7 in April. The survey reflected improved expectations for income, business conditions, and employment, while fears of a recession in the next 12 months receded.
- US Durable Goods Orders headline figure, on the other hand, declined by 6.3%, on the back of falling aircraft demand. April’s numbers came slightly better than the 7.9% fall anticipated by the market, failing to dent the US Dollar’s recovery.
- The focus today will be on the release of the minutes from the last Federal Reserve (Fed) meeting, which might provide further clues about the central bank’s next monetary policy steps.
Technical analysis: EUR/USD remains capped by the reverse trendline, at 1.1350
EUR/USD is correcting lower after last week’s impulsive rally. The pair´s reversal has extended below the bottom of the ascending channel, and bears are eyeing support at 1.1255, the May 22 low, ahead of the May 19 lows at 1.1220.
On the upside, the immediate resistance is at the reverse trendline, now at 1.1350, before extending lower. Above here, the next resistance is located at the May 27 and 26 highs,1.1400 and 1.1420, respectively.
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 | 0.04% | 0.06% | -0.06% | 0.06% | 0.05% | -0.35% | 0.03% | |
| EUR | -0.04% | 0.05% | -0.05% | 0.02% | 0.01% | -0.36% | 0.03% | |
| GBP | -0.06% | -0.05% | -0.10% | 0.02% | -0.02% | -0.07% | -0.00% | |
| JPY | 0.06% | 0.05% | 0.10% | 0.10% | 0.08% | -0.27% | 0.16% | |
| CAD | -0.06% | -0.02% | -0.02% | -0.10% | -0.00% | -0.36% | -0.02% | |
| AUD | -0.05% | -0.01% | 0.02% | -0.08% | 0.00% | -0.04% | 0.02% | |
| NZD | 0.35% | 0.36% | 0.07% | 0.27% | 0.36% | 0.04% | 0.05% | |
| CHF | -0.03% | -0.03% | 0.00% | -0.16% | 0.02% | -0.02% | -0.05% |
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).
EUR/USD 4-Hour Chart
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.