Euro dollar under pressuredriven by various factors which above all favor the appreciation of the greenback.
The pair is trading below 1.0800 after data from Germany showed retail sales fell 1.9% month-on-month in February.
Furthermore, the recovery in demand for US dollars is further influencing the downside of EUR/USD. Driven by both the Fed’s mixed views and the strength of both the US economy and the stock market, the greenback continues to appreciate, poised for its best quarter since late 2022.
On the contrary, the community currency does not appear to be able to benefit from elements favorable to earnings. The euro-dollar therefore recorded a declinewith the Forex spotlight shining more than ever on US macro data and expectations regarding rate cuts.
Why is EUR/USD falling? All the factors to monitor
Aggressive comments by Fed Governor Christopher Waller on the night of Wednesday March 27 fueled speculation that the US central bank is in no hurry to loosen monetary policy and it will lag behind other major rate makers when it finally comes time to reverse course (with the cost of money falling).
The market is therefore holding back bets on the timing of rate cuts and this helped lead the euro below 1.08 per dollar for the first time in a month.
While improving risk appetite has made it difficult for the greenback to find demand, Waller’s statement has helped the currency remain resilient against its rivals and limit the rise in EUR/USD. In detail, the dollar index was pushed to near six-week highs on Thursday and the US currency gained on the euro, pound, Swiss franc, Swedish krona, Chinese yuan and Australian dollar.
Furthermore, news is arriving in the last days of March that could extend the greenback’s 3% run against the major currencies of the last three months (the strongest appreciation since the third quarter of 2022). The Fed’s preferred inflation gauge is due on Friday, along with a speech from Jerome Powell and the two events have the potential to impact the pair.
On the Eurozone front, however, there is a lack of reasons to push the single currency. In Germany, retail sales fell 1.9% month-on-month in February. This followed a 0.4% contraction in January and was worse than market expectations for a 0.3% increase, making difficult for the euro to regain strength.
With data also showing eurozone bank loans stagnating last month, ECB board member Fabio Panetta he was the last to signal a turning point in the interest rate cycle. “Risks to price stability have diminished and are materializing conditions to initiate monetary easing”, he has declared. Rate cuts mean a weakening of the currency.
The euro dollar it could still remain stuck below the threshold of 1.08 after the reading of US inflation on Friday 29 March. According to ING strategists, in fact, “February PCE core inflation data for the United States is forecast at a sticky 0.3% on a monthly basis. Below the support at 1.0800, we could see EUR/USD head towards 1.0780 and perhaps 1.0750. However, one-month EUR/USD volatility of less than 5% suggests that trading conditions will continue to be sticky.”
