Euro gives back half of its gain on US-Iran diplomacy
About half of the Euro's climb on a weaker Dollar has already gone. EUR/USD rose from a session low just above 1.1150 to just under 1.1250, its highest since October 22, before falling back to just under 1.1200. It went through Friday's high on the way up and is trading back inside Friday's range.
The Euro has recouped half of its recent gains against the US Dollar following improved prospects in US-Iran diplomatic talks. The EUR/USD currency pair climbed from just above 1.1150 to just under 1.1250, before retracing back to just under 1.1200. This fluctuation resulted from the weakening US Dollar and President Trump's statements about extending diplomacy with Iran.
Crude Oil prices dropped in response to President Trump's diplomatic signals, causing a corresponding decline in the US Dollar, which strengthened further against the Euro. Despite this, the European Central Bank's Governing Council member Escriva noted that the oil and gas price shock was larger than anticipated, with no immediate impact on other price levels.
ECB Governing Council member Escriva also mentioned that there were no signs of energy costs spreading to other areas of the economy, and the Banque de France's Governor Moulin described the impact on the wider economy as moderate. The Eurozone's October inflation figure, released on Wednesday, is forecasted at 3.9%, with the core rate remaining steady at 2.5%.
The ECB President, Lagarde, will speak on Thursday, and her comments will influence the ECB's decision on the 2.50% deposit rate in December. In the US, the Institute for Supply Management (ISM) services index is expected on Wednesday, with a forecast of 54.8, and the Nonfarm Payrolls (NFP) report is scheduled for release on Friday, with a forecast of 65K.
Both reports will provide insights into the Federal Reserve's potential rate hikes following the October 28 hold.
The Euro, adopted by 20 European Union countries, is the second most heavily traded currency globally, trailing only the US Dollar. It comprises 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion. As the reserve bank for the Eurozone, the European Central Bank (ECB) is responsible for setting interest rates and managing monetary policy, with the primary goal of maintaining price stability through inflation control or economic growth stimulation.
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