- EUR/USD drifts are higher to nearly 1.1335 in an early Asian session.
- Fed -Fed -Beige Book Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed Fed, companies dealing with the early stages of Trump’s tariffs are trying to transfer the growing costs to consumers.
- Muller EBC said that rates may have a decrease below neutral in trade.
EUR/USD pair of edge higher to around 1.1335 during an early Asian session on Thursday. The relief of concerns about the potential tariff threats by US President Donald Trump exerts to sales pressure to the US dollar (USD).
According to the Beige Book report from the Federal Reserve (FED) on Wednesday, companies dealing with the early stages of Trump tariff are looking for ways to transfer rising costs to consumers. Companies reported to receive notifications from suppliers on increased prices and tried to find ways not to absorb growth, while noticing uncertainty as to the possibility of passing them to clients.
At the beginning of the month, Trump imposed a basic import tax of 10% or more on dozens of nations, but then unexpectedly stopped taxes for 90 days to negotiate lower rates to the countries. However, uncertainty related to commercial policy and fears regarding the economic slowdown in the US could drag Greenback lower and create the EUR/USD wind.
On the other side of the pond, the European Central Bank (EBC) reduced the main interest rate by a quarter of the percentage point to 2.25% at the April meeting last week. During the press conference, the President of EBC Christine Lagarde said that American tariffs for EU goods, which increased from an average of 3% to 13%, already harm the perspectives of the European economy.
Meanwhile, a member of the ECB Council Madis Muller said on Wednesday that the central bank may require a reduction in interest rates to levels stimulating the economy, if trade uncertainty turns out to be more harmful to growth. Career remarks from ECB decision makers may charge a common currency in the near future.
FAQ euro
The euro is the currency of 19 European Union countries, which belong to the euro area. This is the second most frequently commercial currency in the world behind the American dollar. In 2022, it accounted for 31% of all currency transactions, with an average daily turnover of over USD 2.2 trillion per day. EUR/USD is the most rotating currency pair in the world, which is about a 30%discount on all transactions, followed by EUR/JPy (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (EBC) in Frankfurt, Germany is a bank reserve bank. EBC sets interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means either controlling inflation or stimulating growth. Its main tool is to escalate or reduce interest rates. Relatively high interest rates – or waiting for higher feet – will usually bring the benefits of the euro and vice versa. The ECB Managing Council makes decisions regarding monetary policy at meetings taking place eight times a year. Decisions are made by the heads of national banks of the euro area and six eternal members, including the President of EBC, Christine Lagarde.
Data on inflation in the euro area, measured by a harmonized consumer price indicator (HICP), are an critical econometric for the euro. If inflation increases more than expected, especially if it is above the target 2% EBC, it obliges EBC to raise interest rates to restore it to control. Relatively high interest rates compared to its counterparts will usually benefit the euro, because it makes the region more attractive as a place for global investors to park their money.
The data release the health of the economy and can affect the euro. Indicators such as GDP, PMI production and services, surveys regarding employment and consumer moods can affect the direction of the common currency. A robust economy is good for the euro. It not only attracts more foreign investment, but can encourage EBC to set interest rates, which will directly strengthen the euro. Otherwise, if economic data is tender, the euro will probably fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are particularly significant because they constitute 75% of the euro area economy.
Another significant issue of data for the euro is the commercial balance. This indicator measures the difference between what the country earns on exports and what spends on imports in a given period. If the country generates a highly sought after export, its currency will gain value only from additional demand created by foreign buyers trying to buy these goods. Therefore, a positive net trade balance strengthens currency and vice versa for a negative balance.
