EUR/USD has retraced previous losses during Monday’s European session and trades near 1.1750 at the time of writing, drawing closer to last week’s high, at 1.1762. The pair has been boosted by an unexpectedly strong Eurozone’s Industrial Production release, which has improved the market mood, ahead of an array of key macroeconomic events later in the week.
Data released by Eurostat earlier on Monday revealed that the region’s factory output growth accelerated to 0.8% pace in November, from 0.2% in October, beating expectations of a 0.1% growth. Year-on-year, industrial production increased 2%, from the 1.2% growth seen in October.
From a wider perspective, the EUR/USD keeps consolidating gains after rallying nearly 2% over the last three weeks. Investors’ bets on further rate cuts by the US Federal Reserve (Fed) and the highly likely replacement of Chairman Jerome Powell by a more dovish chair keep US upside attempts limited for now.
Traders, nevertheless, maintain a cautious mood, reluctant to take excessive risks ahead of key macroeconomic releases later this week, namely the delayed October and November’s US Nonfarm Payrolls (NFP) reports on Tuesday, and November’s Consumer Prices Index (CPI) on Thursday. In between, the ECB will release its monetary policy decision also on Thursday.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | -0.17% | -0.53% | 0.04% | 0.06% | 0.22% | -0.04% | |
| EUR | 0.08% | -0.09% | -0.47% | 0.11% | 0.14% | 0.29% | 0.04% | |
| GBP | 0.17% | 0.09% | -0.37% | 0.20% | 0.23% | 0.38% | 0.13% | |
| JPY | 0.53% | 0.47% | 0.37% | 0.59% | 0.61% | 0.77% | 0.51% | |
| CAD | -0.04% | -0.11% | -0.20% | -0.59% | 0.03% | 0.18% | -0.08% | |
| AUD | -0.06% | -0.14% | -0.23% | -0.61% | -0.03% | 0.15% | -0.13% | |
| NZD | -0.22% | -0.29% | -0.38% | -0.77% | -0.18% | -0.15% | -0.26% | |
| CHF | 0.04% | -0.04% | -0.13% | -0.51% | 0.08% | 0.13% | 0.26% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily Digest Market Movers: Monetary policy divergence supports the Euro
- The Euro (EUR) holds most of the gains from the last three weeks on Monday, supported by the divergence in monetary policy between the ECB and the Fed. The Fed is expected to cut rates at least once in 2026, while the ECB has suggested that the next monetary policy change might be a rate hike.
- On Friday, President Trump stated in an interview that former Fed Governor Kevin Warsh is the best-positioned candidate to replace Chairman Powell at the end of his term in May. Trump has also mentioned White House economist Kevin Hassett as a candidate for the job. The President also said that the next central bank Chair should listen to his opinion when deciding the future direction of interest rates.
- Data from China released earlier on Monday revealed that Industrial Production slowed down against expectations in November, while retail consumption grew at its lowest pace in nearly two years. These figures have renewed concerns about the health of the world’s second-largest economy and hammered risk appetite during the Asian session.
- Also in China, news that the state-backed property developer China Vanke is struggling to find a way to avoid bankruptcy has brought concerns about the country’s property sector back to the table, further souring market sentiment.
- In the US, the NY Empire State Manufacturing Index is seen dropping to 10.6 in December from 18.7 in the previous month. After that, Fed Governor Stephen Miran and New York Fed President John Williams will appear in public and might give further clues about the central bank’s monetary policy plans.
Technical Analysis: EUR/USD consolidates gains after a sharp rally
The EUR/USD is trading within a tight range, right below the multi-month highs of 1.1762 hit last week. This consolidation phase is allowing the 4-Hour Relative Strength Index (RSI) to retreat from overbought territory, yet still standing at levels consistent with a solid bullish trend. The Moving Average Convergence Divergence (MACD) indicator, however, shows an impending bearish cross, suggesting that a further correction might be ahead.
Immediate support is at the December 12 low, near 1.1720. Beyond that, Thursday’s low, at the 1.1680 area, and the December 9 low at 1.1615 will come into focus. To the upside, the December 11 high, at 1.1762, and the October 1 peak at around 1.1780 are likely to challenge bulls. Further up, the target is the September 23 and 24 highs near 1.1820.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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