- EUR/USD remains steady as the US Dollar holds ground following stronger jobs data.
- US Treasury Secretary Scott Bessent is scheduled to meet with Chinese officials on Monday.
- ECB policymaker Yannis Stournaras warned that uncertainty related to potential US tariffs could disrupt growth in the Eurozone.
EUR/USD holds steady after registering losses in the previous session, trading around 1.1400 during the Asian hours on Monday. The pair faced challenges as the US Dollar (USD) received support from Friday’s stronger-than-expected United States (US) jobs data for May, which raised the odds of the Federal Reserve (Fed) keeping its benchmark interest rate steady at its next two monetary policy meetings.
The US Bureau of Labor Statistics (BLS) revealed that US Nonfarm Payrolls (NFP) rose by 139,000 in May, compared to the 147,000 increase (revised from 177,000) in April. This reading came in above the market consensus of 130,000. Moreover, the Unemployment Rate held steady at 4.2%, and the Average Hourly Earnings remained unchanged at 3.9%, both readings came in stronger than the market expectation.
Traders will likely monitor US-China trade talks scheduled in London on Monday. US Treasury Secretary Scott Bessent and two other Trump administration officials are set to discuss with Chinese counterparts after both countries have argued over numerous issues amid an escalating trade war.
European Central Bank (ECB) policymaker Yannis Stournaras stated that the eurozone has achieved a soft landing and emphasized that the policy easing is nearly done. However, Stournaras cautioned that uncertainty related to potential US tariffs could disrupt growth, per Bloomberg.
ECB President Lagarde also noted that the central bank is close to ending the easing cycle. Monetary policy is “well-positioned,” while the current uncertain outlook is more than usual, Lagarde added.
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.
