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Euro rises on Friday as market sentiment lifts most ships

by SuperiorInvest


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  • The euro posted weak to modest gains on Friday ahead of the ECB’s outage.
  • Europe got a reprieve from high-impact economic data this week.
  • The latest Eurozone HCOB PMIs will be released next week, as well as the ECB’s next rate-setting call.

The Euro (EUR) rose sharply on Friday as market sentiment bounced back on the final trading day of the week.

Europe took a break from the economic calendar last week and most markets focused on headlines from the World Economic Forum (WEF) in Davos, Switzerland. European Central Bank (ECB) policymakers led the media circuit in an attempt to lower market expectations of a rate cut by the ECB. ECB President Christine Lagarde expend considerable effort on a specific non-solution Monetary Policy during a series of scheduled appearances at WEF.

Daily overview of market movements: The euro saw a weak recovery on Friday

  • ECB President Lagarde wrapped up the last of her three scheduled appearances in Davos without specifically addressing monetary policy.
  • ECB officials have been regularly in the news this week, warning that market expectations for rate cuts have far outstripped what the ECB is willing to do.
  • ECB President Lagarde has warned that overly optimistic markets will hinder rather than help the fight against inflation.
  • The ECB could cut by the summer, but only if new inflationary pressures do not emerge.
  • Lagarde from the ECB to the edge of Davos: The ECB’s aggressive rate cut bets are not helping
  • A lack of economic data for the eurozone this week provided euro traders with relief from headline shock.
  • The ECB has entered a “blackout” period ahead of next Thursday’s ECB meeting and rate-setting call.
  • With Eurozone PMI data due next Wednesday, markets are forecasting a slight increase in January’s HCOB Composite PMI from 47.6 to 48.1.
  • Next week: It’s time for central banks

Today’s price in euros

The table below shows today’s percentage change in the Euro (EUR) against the major listed currencies. The euro was strongest against the pound sterling.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar -0.11% 0.23% -0.18% -0.12% -0.05% 0.17% 0.13%
euros 0.11% 0.33% -0.07% -0.02% 0.06% 0.27% 0.24%
GBP -0.23% -0.33% -0.40% -0.37% -0.28% -0.06% -0.07%
CAD 0.18% 0.05% 0.39% 0.02% 0.11% 0.33% 0.32%
AUD 0.14% 0.06% 0.40% -0.04% 0.09% 0.30% 0.27%
JPY 0.05% -0.05% 0.29% -0.11% -0.08% 0.23% 0.20%
NZD -0.16% -0.27% 0.06% -0.33% -0.30% -0.21% -0.01%
CHF -0.16% -0.23% 0.06% -0.33% -0.29% -0.18% 0.00%

The heat map shows the percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will be EUR (base)/JPY (rate).

Technical analysis: The euro saw gains on Friday, but little momentum against the dollar

The Euro (EUR) is recovering slowly on Friday and is in the green across the major currency boards except for small miles against American dollar (USD) and the Canadian dollar (CAD). The euro is about a third of a percent higher against the pound sterling (GBP) and the Australian dollar (AUD) and about a quarter of a percent higher against the Swiss franc (CHF).

The EUR/USD sees lame trading of the pair caught in short-term congestion between major moving averages. Intraday action was mostly flat on Friday as the pair saw a weak rebound from the mid-week dip at 1.0850 and a short-term price ceiling was drawn from 1.0900.

Daily candles are trapped between the 50-day and 200-day simple moving averages (SMA) at 1.0920 and 1.0850, respectively. The pair remains in technically bullish territory with a higher-low pattern etched from the September lows near 1.0450. The price action sees a technical ceiling at the January soft barrier at the 1.1000 handle.

EUR/USD hourly chart

EUR/USD daily chart

Frequently asked questions of the ECB

The European Central Bank (ECB) in Frankfurt, Germany is the reserve bank for the Eurozone. The ECB sets interest rates and directs monetary policy for the region.
The ECB’s primary mandate is to maintain price stability, which means keeping inflation around 2%. Its primary tool to achieve this goal is raising or lowering interest rates. Relatively high interest rates will usually lead to a stronger 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 national banks of the eurozone and six permanent members, including ECB President Christine Lagarde.

In extreme situations, the European Central Bank can enact a policy tool called quantitative easing. QE is the process by which the ECB prints euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually leads to a weaker euro.
QE is a last resort when simply cutting interest rates is unlikely to achieve the goal of price stability. The ECB used it during the Great Financial Crisis of 2009-11, in 2015 when inflation remained stubbornly low, and also during the covid pandemic.

Quantitative tightening (QT) is the opposite of QE. It is carried out after QE, when the economic recovery is underway and inflation starts to rise. While in QE the European Central Bank (ECB) buys government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds and stops reinvesting the principal due in bonds it already holds. It is usually positive (or bullish) for the euro.

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