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Market Analysis – EURUSD

The Euro is declining against the US Dollar this morning as we approach the European Market Open. The day started with the price moving in favour of the Euro before collapsing once again to the day’s price low; the asset is currently trading at 1.2217. The previous day’s price movement was in favour of the US Dollar though the week’s candlestick has seen the exchange rate slightly higher. The asset is likely to be highly influenced by the Federal Reserve and the US Employment figures which are scheduled for tomorrow and Friday.

Investors are still focused on the US’s top subject which is inflation and if it bears a threat to the condition of the economy. Of particular interest are the comments of the US Fed officials, who sooner-or-later, may decide to adjust the monetary policy in order to prevent overheating of the economy, though no direct indication has yet been received. Regulator board members, Mr. Bostic and Evens, will speak today on the outlook for economic and monetary policy at the Economic Club of New York seminar, and Fed Vice Chair, Randal Quarles, will make statements at the Politico virtual meeting. In their comments, investors will look for hints on further actions of the regulator. The market will also monitor the further fate of the infrastructure package of the administration of President Joe Biden. Members of the Democratic Party are likely to try to get the bill through Congress, since they are not satisfied with the counter-proposal of the Republicans, which provides for a reduction in spending on the infrastructure plan to $928 billion.

Looking across the Atlantic, Investors are also focused on the publication of a large block of economic statistics which were released the day before, generally speaking the figures were positive. The manufacturing PMI for the Eurozone countries in May rose from 62.8 to 63.1 points. In Germany, the indicator fell from 66.2 to 64.4 points, but turned out to be better than the forecast of 64.0 points. The indicator for France increased from 58.9 to 59.4 points, which is the highest value since 2000. Generally, European production continues to grow, but experts note that it is being held back by the effects of the pandemic, supply chain disruptions, and rising commodity prices. 

The unemployment rate in the Eurozone in April fell from 8.1% to 8.0%, which is also a good sign, but still far above the previous unemployment rate prior to Covid. However, the rise in inflation continues to worry the market, especially the states which rely on a low exchange rate to boost the employment sector and their Gross Domestic Product. Preliminary May data released today recorded an annualized rise in CPI to 2.0%, in line with the ECB’s target. Experts believe that inflation will continue to grow, although the regulator still considers this outbreak temporary. Generally, the mood of investors and the authorities remains positive. German Deputy Finance Minister Joerg Kukies said last night that the country’s economy will reach a pre-pandemic level in the second half of the year.

Looking today at the US Dollar Index we can see the US Dollar is increasing in value so far today as it did yesterday. However, even with this in mind the price continues to remain generally low and is even lower than the price of the weekly market open. Also looking at the Euro Currency Index which is based 75% on the EURGBP, EURJPY and the EURCHF. The index today also continues to rise forming its fifth consecutive bullish day. 

As mentioned above, performance of both indexes are likely to be heavily influenced by the comments made in the next 48-hours by the both Central Bank, as well as the Non-Farm Payroll figure in the States on Friday. Members of the Federal Reserve are due to speak both tonight and tomorrow, while the president of the European Central Bank is due to speak to reporters on Friday before the US releases their employment figures. 







Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.
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