EUR/USD nudges higher amid hopes of a peace deal in Ukraine
- The Euro trims losses, the USD gives away gains on Tuesday following Ukraine’s summit.
- EU and US officials are expected to work on a security package for Ukraine..
- Market volatility remains subdued ahead of Lagarde and Powell’s speeches later in the week.
The EUR/USD is posting moderate gains on Tuesday’s European morning session, trading at 1.1680 after bottoming at 1.1640 in the previous day. A moderate optimism on Ukraine’s summit between United States (US) President Donald Trump and Ukrainian President Volodymyr Zelenskyy, and the unexpected increase in the Eurozone Current Account surplus are supporting the common currency.
Trump and Zelensky staged a diametrically opposed image of their last meeting in February, with smiles and a friendly tone preceding the US president’s commitment to guarantee Ukraine’s security in any deal with Russia and pointing to a meeting between Ukrainian and Russian representatives as the next step.
The meeting received a plethora of positive comments from Eurozone leaders, and Bloomberg has reported that officials from the United States and the European Union have committed to work on security guarantees for Ukraine, including “bolstering Ukraine’s military forces and capabilities without any limitations.”
Money markets, however, have been little moved by the geopolitical enthusiasm. The pair has been practically flat in Asia trading and is likely to remain little moved with Europe on holiday. The economic calendar is light with Federal Reserve (Fed) Vice Chair for Supervision Michelle Bowman’s speech as the main market mover, and with investors looking at the European Central Bank (ECB) President Christine Lagarde and Fed Chairman Jerome Powell’s speeches later this week.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.18% | -0.07% | 0.00% | 0.11% | 0.09% | -0.03% | -0.22% | |
| EUR | 0.18% | 0.09% | 0.07% | 0.29% | 0.17% | 0.15% | -0.04% | |
| GBP | 0.07% | -0.09% | -0.16% | 0.20% | 0.14% | 0.06% | -0.13% | |
| JPY | 0.00% | -0.07% | 0.16% | 0.17% | 0.17% | -0.00% | -0.15% | |
| CAD | -0.11% | -0.29% | -0.20% | -0.17% | -0.01% | -0.14% | -0.33% | |
| AUD | -0.09% | -0.17% | -0.14% | -0.17% | 0.01% | -0.06% | -0.25% | |
| NZD | 0.03% | -0.15% | -0.06% | 0.00% | 0.14% | 0.06% | -0.19% | |
| CHF | 0.22% | 0.04% | 0.13% | 0.15% | 0.33% | 0.25% | 0.19% |
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: Waiting for the central banks
- FX markets remain subdued on Tuesday, with the Euro remaining within last week’s range, while the US Dollar (USD) ticks up from its lows but lacks real bullish momentum. Investors are looking to the ECB and Fed chiefs’ conferences for more insight about their respective monetary policies.
- Later today, Fed’s Bowman is expected to speak and will, most likely, reiterate the need to cut interest rates in the coming months to support a softening labour market.
- The market is still pricing an 84% chance that the Fed will cut its benchmark rate by 25 basis points in September; thus, Bowman’s comments will likely have a limited impact on the US Dollar, especially with Powell’s conference at the Jackson Hole meeting on the horizon.
- Beyond that, US Housing Starts and Building Permits are expected to have remained fairly steady at last month’s levels.
- In Europe, June’s Current Account data has shown an unexpectedly higher surplus of EUR 35.8 billion from the EUR 32.3 billion seen in May. Market analysts had anticipated a decline to a EUR 30.3 billion positive account in June.
Technical Analysis: EUR/USD is moving within a previous range above 1.1635
The EUR/USD pair was halted, once again, at the descending trendline from early July’s highs, which leaves price action wavering within last week’s range, above 1.1635. The 4-hour Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicators have retreated to their midlines, showing a lack of a clear bias.
Support at the August 14 low of 1.1630 is holding bears so far. Below here, the 1.1590 area, which broadly aligns with the August 11 low and August 4 high, might provide some support ahead of the August 5 low at around 1.1530.
On the upside, the mentioned trendline resistance, now at 1.1720, and last week’s range top, at 1.1730, shape the key resistance area for bulls. These levels need to be broken to extend the pair’s recovery from late July lows into the July 24 high at 1.1789 and of the July 1 peak, at 1.1830.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.