The euro slipped 0.4% lower versus the US dollar on Friday, resulting in a 0.3% selloff across the week as a whole. The euro US dollar exchange rate closed Friday’s session below support at US$1.11 at US$1.1090. The pair is edging cautiously higher in as trading kicks off at the start of the week.
The key risk event for the euro this week will be the European Central Bank’s monetary policy announcement on Thursday. The central bank is not expected to make any changes to monetary policy. However, the euro could experience some volatility as the ECB undergoes a policy review under the new President Christine Lagarde. As a result of the review, the ECB could alter its inflation target for the first time since 2002.
The euro could receive some support if ECB policy makers remain at least neutral on the prospects of the eurozone economy. A hawkish stance from the central bank is unlikely.
If business sentiment data and PMI data released later in the week show that the eurozone and particularly Germany are still experiencing weakness, the euro could come under further pressure.
Trump’s Impeachment Trial In Focus
The US dollar ended the previous week with gains versus most of its rivals. The most relevant event over the past few days was the signing of the first phase US – China trade deal. The deal was in fact a little disappointing given that it didn’t include the rollback of tariffs, a move that some market participants consider to be essential to boost global growth. There will be a phase two deal which investors hope will address more of Trump’s key issues than the first stage and where levies will be revised.
With little in the way of US economic data this week, investor attention will be firmly on US President Trump’s impeachment trial. After Martin Luther King Day on Monday, members of the upper house will decide on 20th January, whether to remove Trump. Given that the upper house is controlled by the Republicans, he will likely be acquitted.
Later in the week Trump and central bankers across the globe will meet in Davos for the world economic forum.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 EUR = 1.12829 USD
Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.
Or, if you were looking at it the other way around:
1 USD = 0.88789 EUR
In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.