EUR/USD gives away gains with all eyes on Trump-Zelenskyy meeting
- The Euro trims Friday’s gains as the US Dollar picks up ahead of the Trump-Zelenskyy summit in the White House.
- Trump is expected to pressure Zelenskyy to accept Putin’s requirements for a peace deal in Ukraine.
- Later this week, the speeches by ECB’s Lagarde and Fed’s Powell will be the main fundamental highlights.
The EUR/USD is trimming some gains, retreating from levels beyond 1.1700 to 1.1685 on Monday’s early European session. Currency volatility remains low, with a mild risk-off sentiment ahead of a meeting between United States (US) President Donald Trump and his Ukrainian counterpart Volodymyr Zelenskyy, who will be joined by several European leaders, and whose positions on the conditions for a peace deal in Ukraine seem far apart.
Media reports suggest that Trump will try to obtain a quick deal by pushing Zelenskyy to accept most of the requirements posted by Putin in Alaska. This would mainly involve giving up all the territory taken by Russia, a proposal the Ukrainian president has rejected in previous times and which is unlikely to find support among European leaders.
The calendar is void in the Eurozone and the US on Monday, and the focus will be on European Central Bank President Christine Lagarde’s speech on Wednesday and, above all, on Fed Chairman Jerome Powell’s speech on Friday. In light of the recent macroeconomic data, the risk is on a too-hawkish Powell, who might dampen hopes of a Federal Reserve (Fed) rate cut in September that is widely expected by the market.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | 0.01% | 0.09% | -0.16% | -0.11% | -0.28% | 0.20% | |
| EUR | -0.25% | -0.24% | -0.19% | -0.41% | -0.35% | -0.56% | -0.05% | |
| GBP | -0.01% | 0.24% | -0.04% | -0.17% | -0.10% | -0.32% | 0.15% | |
| JPY | -0.09% | 0.19% | 0.04% | -0.22% | -0.17% | -0.33% | 0.11% | |
| CAD | 0.16% | 0.41% | 0.17% | 0.22% | 0.02% | -0.12% | 0.32% | |
| AUD | 0.11% | 0.35% | 0.10% | 0.17% | -0.02% | -0.21% | 0.26% | |
| NZD | 0.28% | 0.56% | 0.32% | 0.33% | 0.12% | 0.21% | 0.44% | |
| CHF | -0.20% | 0.05% | -0.15% | -0.11% | -0.32% | -0.26% | -0.44% |
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: Low FX volatility ahead of Ukraine’s summit
- FX markets have been practically flat in the Asian Session, and they seem to remain that way in Europe. In the absence of key macroeconomic releases, all eyes are on a Trump-Zelenskyy meeting, which, right now, looks very unlikely to deliver significant progress on a steady peace agreement.
- The secondary focus this week will be on monetary policy, especially on Fed Powell’s speech at the Jackson Hole Symposium due on Friday. The strong inflation and Retail Sales data seen last week have offset the impact of the weak labour figures previously released. This might add reasons for Powell to maintain his hawkish stance, warning about the inflationary impact of tariffs and putting September’s rate cut into question.
- US data released on Friday showed that Retail sales grew at a 0.5% pace in July, as expected, following a 0.9% growth in June. Excluding automobiles, sales of all other products increased by 0.3%, following a 0.8% increment in the previous month, all in all numbers pointing to a resilient consumption and a healthy economic growth.
- These figures follow a larger-than-expected increase in producer inflation, reported earlier last week, which resurfaced concerns about the impact of Trump’s tariffs and wiped out hopes of a 50 basis point cut after the summer, which had been suggested by US Treasury Secretary Scott Besent.
- In Europe, ECB President Christine Lagarde might speak about monetary policy at the World Economic Forum in Geneva on Wednesday. She is highly likely to stick to the “meeting by meeting” stance, but any hint at the end of the easing cycle will be taken as hawkish.
Technical Analysis: EUR/USD is hovering below trendline resistance at 1.1725
The EUR/USD pair maintains its positive bias from early August loss at 1.1400 intact, yet with bullish momentum fading right below a key resistance level, at the 1.1725-1.1735 area, where the trend resistance from July 1 highs meets the August 13 high. The 4-hour Relative Strength Index (RSI) is turning lower, but still at positive levels, and the MACD shows a lack of clear bias with traders awaiting the outcome of the Ukraine summit to take investment decisions.
To the downside, immediate support lies at the August 14 low of 1.1635 ahead of the 1.1590 area, which broadly aligns with the August 11 low and August 4 high. Further down, bears might be attracted by the August 5 low at around 1.1530. A bullish reaction above 1.1735, on the contrary, is likely to lure bulls into the July 24 high at 1.1789 ahead of the July 1 high at 1.1830.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.