According to the US Dollar Index (DXY), the EUR/USD rate made solid gains at the end of the North American session on Friday after rumors of intervention in foreign exchange markets aimed at strengthening the Japanese yen, which caused the value of the US dollar (USD) to fall with a loss of over 0.70%. This is despite the fact that Friday’s macroeconomic data were moderately positive. At the time of writing, the pair is trading at 1.1811, after hitting a four-month high of 1.1826 earlier in the day.
The euro is soaring as speculation over currency intervention drives the dollar to its lowest levels in months
Bloomberg’s headline: “Yen Jumps Most Since August as Intervention Risks Grow” appeared slow in the session amid speculation that Japanese authorities may be preparing to intervene in markets.
The Bloomberg article mentioned that “traders reported that the Federal Reserve Bank of New York had conducted a so-called interest rate review at major banks, asking for indicative exchange rates – a move that was seen as an indication that the Bank may be preparing for another intervention.”
As a result, DXY, which measures the value of the US currency against the other six, widened its losses to levels last seen in September 2025, down from 98.33, to stand at 97.53.
A University of Michigan survey found that U.S. economic data showed improved sentiment among American consumers. On the business front, the S&P Global Flash Purchasing Managers Index showed signs of strength in the economy, but S&P’s chief economist said U.S. economic growth could snail-paced further in the first quarter of 2026.
In Europe, flash HCOB PMIs for the bloc were mixed, with composites and services PMIs falling below estimates, while manufacturing PMIs showing signs of slight growth.
Economic data for the next week
In Europe, the program will feature German Business Climate and GfK Consumer. Gross domestic product (GDP) figures will be released for the bloc, Germany, Spain and France. Investors will also watch speeches by European Central Bank (ECB) officials such as Nagel, Lagarde, Elderson and Schnabel.
In the U.S., investors will focus on hard-wearing goods orders, the four-week average ADP employment change, a policy decision by the Federal Open Market Commission and the subsequent news conference led by Fed Chairman Jerome Powell.
Daily market update: Euro gains value as dollar falls
- University of Michigan consumer sentiment exceeded forecasts of 54 in December’s final reading, reaching 56.4. Joanne Hsu, responsible economist, revealed that households remain under purchasing power pressure and are concerned about increased prices and a weaker labor market.
- The survey showed that inflation expectations have softened. One-year expectations fell to 4.0% from 4.2%, and five-year expectations dropped to 3.3% from 3.4%.
- The S&P Global Composite PMI showed moderate growth in December, rising to 52.8 from 52.7. However, Chris Williamson, chief business economist at S&P Global Market Intelligence, warned that narrow up-to-date business growth in both manufacturing and services sectors raises the risk that first-quarter growth could disappoint.
- Preliminary PMI data for the euro zone showed a frail services sector in January, and the index fell to 51.9, which is below the December reading and market expectations. Earlier releases from Germany surprised on the upside, with the services PMI exceeding expansion estimates, while the manufacturing PMI showed improvement but remains below expansion/contraction levels.
Price in euros this week
The table below shows the percentage change of the euro (EUR) against the major currencies traded this week. The euro was strongest against the US dollar.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.97% | -2.01% | -1.20% | -1.50% | -3.18% | -3.37% | -2.28% | |
| EUR | 1.97% | -0.05% | 0.76% | 0.47% | -1.25% | -1.44% | -0.33% | |
| GBP | 2.01% | 0.05% | 0.57% | 0.52% | -1.19% | -1.40% | -0.28% | |
| JPY | 1.20% | -0.76% | -0.57% | -0.28% | -1.98% | -2.17% | -1.07% | |
| BOOR | 1.50% | -0.47% | -0.52% | 0.28% | -1.68% | -1.89% | -0.80% | |
| AUD | 3.18% | 1.25% | 1.19% | 1.98% | 1.68% | -0.19% | 0.94% | |
| NZD | 3.37% | 1.44% | 1.40% | 2.17% | 1.89% | 0.19% | 1.13% | |
| CHF | 2.28% | 0.33% | 0.28% | 1.07% | 0.80% | -0.94% | -1.13% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select Euro from the left column and move along the horizontal line to US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Technical Outlook: EUR/USD breaks 1.1800, we target 1.200
The EUR/USD technical picture shows a break of the downtrend line drawn from the September and December intraday highs, which cleared around 1.1775, pushing the pair above the 1.1800 level to reach yearly highs at 1.1826.
Momentum, as measured by the Relative Strength Index (RSI), indicates that buyers are in power. Moreover, a clear break above the December 24 peak at 1.1807 shifted the trend from sideways to upwards.
To sustain a bullish continuation, traders need to clear the 1.1850 level, focusing on the 2025 yearly high at 1.1918. Breaking the latter opens the discussion on the 1.2000 test.
On the downside, the first key support is 1.1750, which could open the way towards 1.1700.
Frequently asked questions about the euro
The euro is the currency of the 20 European Union countries belonging to the euro zone. It is the second most widely traded currency in the world after the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with average daily turnover exceeding $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% discount on all trades, 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 euro area. The ECB sets interest rates and manages monetary policy. The ECB’s primary task is to maintain price stability, which means controlling inflation or stimulating economic growth. Its basic tool is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher interest rates – will usually benefit the euro and vice versa. The Governing Council of the ECB takes decisions on monetary policy at meetings held eight times a year. Decisions are made by the heads of the euro zone’s national banks and six eternal members, including ECB President Christine Lagarde.
Inflation data in the euro area, measured by the Harmonized Index of Consumer Prices (HICP), is an significant econometric indicator for the euro. If inflation rises more than expected, especially above the ECB’s target of 2%, this obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to interest rates will typically benefit the euro as they make the region more attractive as a place to park money for global investors.
The published data are used to assess the condition of the economy and may affect the euro. Indicators such as GDP, PMIs for industry and services, employment and consumer sentiment surveys may influence the direction of the common currency. A powerful economy is good for the euro. Not only will it attract more foreign investment, but it may prompt the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is frail, the euro will likely fall. The economic data for the four largest eurozone economies (Germany, France, Italy and Spain) is particularly significant as they constitute 75% of the eurozone economy.
The next significant data release for the euro is the trade balance. This indicator measures the difference between what a country earns from exports and what the country spends on imports over a given period. If a country produces a highly sought after export, its currency will only appreciate in value due to the additional demand generated by foreign buyers wanting to buy those goods. Therefore, a positive net trade balance strengthens the currency and vice versa in the case of a negative balance.
