EUR/USD is heading south for the second consecutive day on Tuesday. The pair trades near 1.1675 at the time of writing, with France’s political and fiscal crisis spooking investors while an unexpected decline in German Factory Orders add to evidence of the weak momentum of the region’s leading economies.
French Prime Minister Sébastien Lecornu shocked markets on Monday with his decision to resign from the government after only 27 days in charge and a few hours after announcing his new cabinet. President Emmanuelle Macron has asked Lecornu to negotiate a way out of the crisis with the governing coalition leaders, but opposition parties on the left and right are calling for a new snap election, and the president’s credibility is severely damaged.
In this context, ECB President Christine Lagarde declared on Monday that the disinflationary process is over, while the bank’s Vice President Luis de Guindos warned about geopolitical risks and weak domestic growth, suggesting that the possibility of another rate cut is still on the table.
Macroeconomic data released earlier on Tuesday has confirmed those fears, as German Factory Orders contracted against expectations in August. In the US, the Government shutdown enters its seventh day, and Trade Balance figures will be delayed, but a slew of Federal Reserve (Fed) policymakers, including the Vice Chair of Supervision, Michelle Bowman, and US President Donald Trump’s new appointment, Stephen Miran, will take the stage and might set the US Dollar’s direction.
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 | 0.34% | 0.38% | 0.26% | 0.08% | 0.41% | 0.63% | 0.20% | |
| EUR | -0.34% | 0.04% | -0.07% | -0.25% | 0.10% | 0.29% | -0.01% | |
| GBP | -0.38% | -0.04% | -0.12% | -0.30% | 0.10% | 0.21% | -0.05% | |
| JPY | -0.26% | 0.07% | 0.12% | -0.16% | 0.19% | 0.28% | -0.07% | |
| CAD | -0.08% | 0.25% | 0.30% | 0.16% | 0.32% | 0.50% | 0.25% | |
| AUD | -0.41% | -0.10% | -0.10% | -0.19% | -0.32% | 0.05% | -0.15% | |
| NZD | -0.63% | -0.29% | -0.21% | -0.28% | -0.50% | -0.05% | -0.35% | |
| CHF | -0.20% | 0.00% | 0.05% | 0.07% | -0.25% | 0.15% | 0.35% |
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’s political woes keep weighing on the Euro
- The Euro remains on the back foot, with investors concerned about France’s political void and its ability to tackle the country’s booming fiscal deficit. The focus will be on President Macron’s attempts to resolve the political deadlock, but his chances diminish by the minute. The Euro is likely to struggle in this backdrop.
- Rating agencies have warned that the political standoff could trigger further downgrades of France’s sovereign debt, according to news reports by Reuters. France’s fiscal debt is nearly twice the European Union’s 3% limit, and some agencies have expressed concerns that failure to apply fiscal consolidation measures will boost financing costs.
- Eurozone macroeconomic data has failed to improve the market mood. German Factory Orders figures released on Tuesday have shown a 0.8% decline in August, compared to market expectations of a 1.4% growth, following a 2.7% contraction in July. Year-on-year, orders have increased at a 1.5% rate, after a 3.3% fall in July.
- Later in the day, Bundesbank President and ECB member Joachim Nagel, and the ECB President Christine Lagarde are due to speak and could likely provide further clues on the bank’s next monetary policy steps.
- In the US, in the absence of macroeconomic releases, the conferences of Fed officials Raphael Bostic, Neel Kashkari, Michelle Bowman, and Stephen Miran might give fundamental guidance for the US Dollar.
Technical Analysis: EUR/USD key support is at the 1.1645 area
The EUR/USD is on a bearish trend from mid-September highs above 1.1900. The 4-hour chart Relative Strength Index (RSI) has consolidated below the key 50 level, highlighting the bearish momentum, and the Moving Average Convergence Divergence (MACD) remains below the signal line.
The recovery attempt from Monday´s lows near 1.1650 found sellers, and the pair returned below the 1.1700 level during Tuesday’s Asian session. Bears are eyeing support at the 1.1645 area (September 25 low). Further down, the September 2 and 3 lows, near 1.1610, and the August 22 and 27 lows, near 1.1575, will come into view..
Upside attempts are likely to be challenged at the descending trendline resistance, now around 1.1730, ahead of the last week’s highs at the 1.1765-1.1775 area, and the September 23 and 24 highs, near 1.1820.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.