EUR/USD Continues Decline Amidst Geopolitical Tensions
- EUR/USD trades in negative territory for the fourth consecutive day around 1.0920 in Monday’s Asian session.
- The risk-off mood supports the US dollar broadly.
- The dovish stance of the ECB weighs on the shared currency.
The EUR/USD pair extends the decline to near 1.0920 during the early Asian session on Monday. The risk aversion amidst escalating geopolitical tensions in the Middle East and conflicts between China and Taiwan exerts selling pressure on riskier currencies like the Euro (EUR).
Factors Impacting EUR/USD Pair
- Escalating geopolitical tensions in the Middle East and conflicts between China and Taiwan.
- Expectations of a 25 basis points rate cut from the Federal Reserve in November.
- ECB’s dovish stance and expected further interest rate cuts.
On Monday, a spokesperson at the US Department of State expressed serious concerns over the People’s Liberation Army (PLA) military drills in the Taiwan Strait and around Taiwan. Any signs of escalating tensions could boost safe-haven flows, benefiting the US dollar and weighing on the EUR/USD pair.
Traders are anticipating a 25 basis points rate cut from the Federal Reserve in November after the US Producer Price Index (PPI) data released on Friday. The CME FedWatch Tool indicates an 86.8% chance of a rate cut, up from 83.3% before the PPI data.
Meanwhile, the Euro faces pressure as the European Central Bank (ECB) is expected to cut interest rates further in the remaining monetary policy meetings this year. The ECB’s dovish stance is reinforced by a faster-than-expected decline in Eurozone inflationary pressures and a ‘fragile’ economic recovery.
Euro FAQs
Key Information about the Euro and Eurozone
The Euro is the currency used by 19 European Union countries in the Eurozone. It is the second most traded currency globally, with an average daily turnover exceeding $2.2 trillion. EUR/USD is the most traded currency pair, accounting for approximately 30% of all transactions.
About the European Central Bank (ECB)
The ECB, located in Frankfurt, Germany, is the central bank for the Eurozone. It sets interest rates and manages monetary policy to maintain price stability by controlling inflation or stimulating growth. The ECB Governing Council makes policy decisions at eight meetings annually.
Factors Influencing the Euro
- Eurozone inflation data and the Harmonized Index of Consumer Prices (HICP)
- Economic indicators like GDP, PMIs, employment, and consumer sentiment surveys
- Trade Balance, which measures a country’s exports and imports
Economic data from major Eurozone economies like Germany, France, Italy, and Spain significantly impact the Euro’s strength. Positive economic indicators and a favorable Trade Balance strengthen the Euro, while negative data weakens it.