EUR/USD hits fresh three-week lows amid French government’s collapse
- The Euro hits lows below 1.1580, hammered by France’s political uncertainty.
- Invewtors’ feaqrs of an surosceptic Prime Minister in Paris are offsetting doubts about Fed’s independence.
- German Consumer Confidence deteriorated further on concerns about employment and inflation.
The EUR/USD pair accelerates losses on Wednesday and is testing levels below the bottom of the last therr weeks’ trading range, at 1.1585 in the European trading session. Market concerns about the collapse of France’s government weighed on the Euro (EUR) on Tuesday, offsetting the US Dollar’s (USD) weakness amid US President Donald Trump’s attempts to influence the Federal Reserve (Fed).
France is the main market focus in Europe after Prime Minister Francoise Bayrou’s minority government failed to achieve support in a confidence vote scheduled for September 8, to approve a drastic slash in spending cuts. This will likely lead to the cabinet’s collapse and the resurgence of eurosceptic rhetoric from the opposition parties, a scenario that has spooked investors.
In this context, the Euro has been unable to draw any significant support from the Greenback’s weakness amid the ongoing Trump-Fed saga. Trump attempted to oust Fed Governor Lisa Cook on Monday in a move aimed at bending the central bank’s consensus to the dovish side. Cook has refused to resign and announced a lawsuit, which is likely to extend the war between the US president and the central bank.
Trump’s move, the last of a long series of attacks on the central bank for being too slow on lowering interest rates, highlights his aim to put the Fed under control. This unprecedented change of regime threatens to erode investors’ confidence in the central bank’s ability to set an appropriate monetary policy and cause a flow of capital away from US assets.
On the macroeconomic front, the German Consumer Confidence Survey has shown further deterioration in August, confirming the soft economic outlook of the region’s leading economy. The US economic calendar is void on Wednesday, and the highlight will be the release of Nvidia’s quarterly earnings results, a key test for the AI sector’s rally, which will define the market sentiment during the coming sessions.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.50% | 0.40% | 0.53% | 0.10% | 0.42% | 0.70% | 0.36% | |
| EUR | -0.50% | -0.11% | -0.05% | -0.44% | -0.15% | 0.15% | -0.19% | |
| GBP | -0.40% | 0.11% | 0.12% | -0.29% | 0.07% | 0.31% | -0.03% | |
| JPY | -0.53% | 0.05% | -0.12% | -0.39% | -0.12% | 0.16% | -0.10% | |
| CAD | -0.10% | 0.44% | 0.29% | 0.39% | 0.32% | 0.62% | 0.26% | |
| AUD | -0.42% | 0.15% | -0.07% | 0.12% | -0.32% | 0.30% | -0.01% | |
| NZD | -0.70% | -0.15% | -0.31% | -0.16% | -0.62% | -0.30% | -0.34% | |
| CHF | -0.36% | 0.19% | 0.03% | 0.10% | -0.26% | 0.00% | 0.34% |
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: France political standoff hits the Euro
- The political crisis in France is a new headache for Euro buyers and is likely to keep the common currency on the back foot during the next sessions. Investors’ doubts about the Federal Reserve’s independence are weighing on the US Dollar and probably keeping the Euro from depreciating further, but the pair’s immediate bias is bearish.
- A news report from Bloomberg revealed that the European Union is planning to remove all tariffs on US industrial imports, in an attempt to obtain a more favourable policy for European Automobiles by the US Government.
- In the US, the focus is on the standoff between US President Donald Trump and Fed Governor Lisa Cook. Recent news reports that Cook has filed a lawsuit against the US president, and her lawyer affirmed that Trump “lacks any factual or legal basis” to oust the governor. The process is likely to drag on, weighing on investors’ confidence in the US institutions.
- US data released on Tuesday beat expectations with July’s Durable Goods Orders declining by 2.8% instead of the 4% fall forecasted by market analysts. Orders for Nondefense Capital Goods excluding Aircraft, the so-called “core Durable Goods,” rose at a 1.1% pace, beating expectations of a 0.3% rise.
- Furthermore, the US Conference Board’s Consumer Confidence Index deteriorated to 97.4 from the previous month’s 98.7 reading, but still fairly above the market consensus of a 96.4 reading. These figures contributed to the US Dollar’s rebound in Tuesday’s US session.
- Earlier on Wednesday, the German GFK Consumer Confidence Survey dropped to -23.6 from a downwardly revised -21.7 in the previous month, with doubts about their jobs and uncertainty about inflation as the main concerns for German consumers. The impact of this data on the Euro, however, has been minimal.
Technical Analysis: EUR/USD rejected again at 1.1700, turns to the 1.1580 support area
EUR/USD upside attempts were capped again near the resistance area above 1.1700, and the pair has turned lower to test the bottom of the last three weeks’ trading range, near 1.1580. Technical indicators are pointing lower with the Relative Strength Index (RSI) on the 4-hour chart below the 50 line, and the Moving Average Convergence Divergence (MACD) Index has entered bearish territory, which suggests that further depreciation is on the cards..
A confirmation below here would clear the way towards 1.1560, the 50% Fibonacci retracement of the mentioned cycle ahead of the August 5 low, near 1.1530.
A recovery from current levels, on the other hand, is likely to be tested at the 1.1730-1.1740 area, where the August 13 and 22 highs meet the trendline resistance from July 1 highs. Further up, the July 24 high, in the area of 1.1790, and the July 1 high at 1.1830 will come into focus.
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.