The EURUSD currency pair was trading almost 90 pips during the early American session as the euro rallied against the weaker US dollar following last week’s nonfarm payrolls data and the ISM PMI data, which triggered the US dollar’s weakness.
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The dollar’s weakness could also be attributed to the ongoing political battles in the United States, as evidenced by the 15 rounds of voting to elect the US House of Representatives leader. The US political quagmire could continue weighing on the US dollar until August when the crucial vote on raising the country’s debt ceiling is expected.
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The currency pair edged higher ahead of the US session as investors bought the euro while selling the US dollar. Most market participants now expect Thursday's upcoming US inflation data to drop, forcing the Fed to reduce its rate hikes further.
The euro was also boosted by the positive eurozone December unemployment rate data released earlier today, which came in at 6.1%, in line with the previous figure and analysts' consensus estimates.
The euro’s performance was also lifted by the upbeat German industrial production figures, which were recorded at 0.2%, meeting analysts’ expectations while representing a significant improvement to the 0.4% contraction recorded previously.
The upbeat eurozone Sentix investor confidence print, which came in at -17.5%, beating analysts' expectations set at -18.1% and the previous figure of -21.0%, also lifted the single currency.
Many other currencies made gains against the US dollar in anticipation of the Fed adopting a less hawkish monetary policy stance, given the dollar’s dominance during most of last year. Looking at the EURUSD price chart below, it is clear that the currency has been on a recovery path since October 2022, when the dollar peaked.
Still, the euro’s performance was inextricably linked to the US dollar’s weakness, given that most of the pair’s gains came during the American session. The risk-on sentiment also played a role in the currency pair’s rally as investors bought riskier assets. The dollar’s safe-have status was not appealing to investors who preferred riskier assets.
*This is not investment advice.
The EURUSD price chart.
The EURUSD currency pair was trading up 89.8 pips (0.84%) as the euro rallied against the dollar.
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