Euro strengthens above 1.1550 as softer US data
- EUR/USD gains ground to around 1.1555 in Thursday’s early Asian session.
- US companies added 44,000 jobs in July, ADP showed.
- Iran and Oman agreed on the coordinates of routes in the Strait of Hormuz.
The EUR/USD pair edges higher to near 1.1555 during the Asian trading hours on Thursday. US Dollar (USD) softens against the Euro (EUR) on cooling tensions in the Middle East and weaker-than-expected US economic data. The US Initial Jobless Claims report is due later on Thursday.
The Guardian reported Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said on Wednesday that Iran and Oman are close to finalizing a proposed framework for commercial shipping through the Strait of Hormuz.
Nonetheless, Iranian officials cautioned that such an agreement would still not automatically open the waterway. Hopes of a breakthrough between the US and Iran improve risk sentiment and provide some support to the riskier assets such as the shared currency in the near term.
Data released by the Automatic Data Processing (ADP) on Wednesday showed that employment in the US private sector increased by 44K in July, compared to a rise of 98K in June. This figure came in below the market consensus of 70K.
Meanwhile, the Services Purchasing Managers Index (PMI) improved to 54.1 in July from 54.0 in the previous month, the Institute for Supply Management (ISM) reported. This reading came in short of expectations at 54.5.
Traders will take more cues from the US jobs data on Friday. If the reports show stronger-than-expected outcomes, this would reinforce higher-for-longer US rate bets and help limit the Greenback’s losses.
Euro holds steady as PMI data show only marginal growth
Strategists at Scotiabank note that the Euro is “steady, extending its latest consolidation in the mid/lower 1.15 area,” with price action broadly aligned to fair value estimates based on US–Germany spread dynamics. They point out that the latest data backdrop is mildly supportive rather than transformative, as “the final services and composite PMI’s offered a fractional improvement on the preliminary prints, indicating marginal levels of growth across the euro area, despite a slight contraction in France and Germany in July.” In their view, this combination of modestly better survey data and still-constructive sentiment continues to underpin the Euro’s recovery, even as growth signals remain uneven across key Eurozone economies.
Fed’s Cook flags inflation risks but keeps rate hike option conditional
Fed’s Cook delivers a speech that scores 7.2/10 on the FXS Speechtracker, modestly above the 6.5/10 historical average, signaling a slightly more forceful tone relative to the established baseline. The remarks balance recognition of sour consumer sentiment and a sturdy job market with an emphasis that inflation threats surpass job market concerns, underscoring a firm commitment to restoring price stability and readiness to hike rates if the disinflation trend fails to reappear. This mix of resilience in the economy and conditional rate hike language keeps the overall tone cautiously hawkish, even as Cook allows that further tightening may still prove unnecessary.
The FXS Fed Sentiment Index falls by 1.93 points to 140.92, indicating a modest hawkish pullback while remaining firmly in hawkish territory above the neutral 100 mark. Despite the decline, the elevated index level confirms that, in aggregate, recent Fed communication tracked by the FXS Speechtracker continues to lean toward inflation vigilance and a bias to tighten if needed.
Technical Analysis: EUR/USD remains capped below key resistance in th near term
In the daily chart, EUR/USD holds just beneath the 100-day simple moving average (SMA), keeping the near-term tone capped despite the recovery off recent lows. Price trades above the Bollinger Bands midline, while the Relative Strength Index (RSI) at 64.34 edges into overbought territory, suggesting that bullish momentum is stretching into a dense overhead supply zone defined by the 100-day SMA and the upper Bollinger band.
On the topside, immediate resistance is seen at the 100-day SMA at 1.1570, followed closely by the upper Bollinger band near 1.1575, forming a tight barrier that bulls need to clear to extend gains. On the downside, initial support is offered by the Bollinger midline at 1.1450, with a deeper protective layer at the lower Bollinger band around 1.1320, where any corrective pullback would likely test the durability of the broader recovery leg.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 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.
