The EUR/USD currency pair has broken its three-day losing streak. It had recovered from a two-week nadir as equity traders cover shorts before key earnings and inflation data that could derail the economic outlook. On Friday, in European trading, the EUR/USD strengthened through the 1.1300 threshold, a reflection of improved market sentiment.
The EUR/USD has skyrocketed in recent days. This increase is a result of a major decrease in global US Dollar, as investors go about profit-taking activities. This decline provided important support for the euro. In turn, the peso continued to recover from its all-time low against the dollar, which had briefly been on a rally of its own. Traders recomposed their positions and benefitted from the ongoing US Dollar pullback. This change enabled the euro to appreciate from its previous troughs.
On Friday morning, the EUR/USD pair was well established above 1.1300 level. This latest move represents a sizeable reversal from recent declines, indicating that investors are looking forward to positive signs on soon-to-be-released economic data. As such, there is strong anticipation for the upcoming release of US Nonfarm Payrolls (NFP). Simultaneously, European Union’s Consumer Price Index (CPI) is contributing to this optimism approaching caution.
The US NFP report this Friday is going to be hugely important. It often serves as a bellwether for the overall health of the US labor market and makes an outsized effect on decisions made by the Federal Reserve about monetary policy. The EU CPI should provide key clues as to the inflation landscape in the Eurozone. These trends are key to understanding the European Central Bank’s policy choices.
Financial market participants continue to trade on eggshells as they find their way in this data-dependent world. The upward movement in the EUR/USD pair represents a larger shift in sentiment among traders. This change comes on the heels of profit taking strategies and expectations surrounding critical economic data. How these factors interact will be looked at carefully as the trading day goes on.