The EUR/USD currency pair continued to experience downward pressure during European trading hours on Tuesday, remaining firmly below the 1.1400 threshold. Partly to blame is the strength of the US Dollar, which has made the most recent dip. Consequently, the Euro is depreciating rapidly against its U.S. counterpart.
At the close of the most recent trading day, EUR/USD were defending losses slightly below that relationship’s important mental landmark of 1.1400. Analysts have noted that the pair’s performance is closely monitored as investors await key US jobs data, which could further influence market dynamics. Traders are feeling jittery because of the expected economic numbers. They are remaining vigilant for any changes in currency value.
One key element to the EUR/USD pair’s current strength has been the renewed strength of the US Dollar. After a sustained period of volatility, the Dollar has re-established some momentum, supported by builds in speculation ahead of upcoming economic reports. The market is laser focused on jobs data. These numbers are poised to start to show the strength or lukewarmness of the US economy and may influence Federal Reserve policy.
This is the latest example of a new normal in which currencies react to economic data. Traders have already started repositioning themselves in anticipation of what each possible scenario means come Friday’s release of jobs data. If risk sentiment changes, the Euro would have a more difficult time rallying through resistance. It will require more definitive signals from the US labor market for it to start gaining steam.
The recent history of the EUR/USD exchange rate shows how external economic conditions can drive currency movements. The US Dollar’s continuing recovery has served as a reminder of just how connected global financial markets truly are. What happens in one part of the country can have a huge influence on all of the others.