The Euro (EUR) was seen trading lower on Friday, at 1.1915, as market focus shifted to key support levels around 1.1900. Despite better-than-expected Gross Domestic Product (GDP) figures from Germany and the Eurozone, the single currency struggled for traction, weighed down by a stronger US Dollar (USD).
In the United States, President Donald Trump is anticipated to announce his choice for Jerome Powell’s successor at the Federal Reserve. Media speculation suggests that former Fed Governor Kevin Warsh is the frontrunner for the position. The potential nomination of Warsh has been positively received by investors, who view him as a stabilizing force for the central bank amid ongoing political pressures.
The optimism surrounding Warsh’s possible appointment, along with reports that US Senate Democrats and Republicans have reached an agreement on a spending package, has boosted sentiment for the USD. This development has allayed fears of a looming government shutdown and provided further support to the currency.
Mixed signals emerged from the latest US economic data released on Thursday. While factory orders exceeded expectations, initial jobless claims rose unexpectedly, and the trade deficit widened, presenting a complex economic picture ahead of a busy data calendar.
On Friday, market participants will pay particular attention to preliminary Eurozone Q4 GDP and German Harmonized Index of Consumer Prices (HICP) figures during the European session. Later in the day, the spotlight will shift to the US Producer Price Index (PPI) data for December, which is expected to reflect moderating inflation rates.
In currency performance, the Euro exhibited the strongest gains against the Japanese Yen, while showing marginal declines against other major currencies, including the US Dollar and British Pound. A summary of percentage changes highlights that the Euro’s recent rally has prompted concerns regarding the competitiveness of European exports in foreign markets. This has led to discussions about potential interest rate cuts from the European Central Bank (ECB), marking a notable shift in sentiment.
Recent Eurozone data showed the economy growing at a steady pace of 0.3% in Q4 and a year-on-year increase of 1.4%. These figures surpassed market expectations, which had forecasted a slowdown. Similarly, Germany posted a GDP growth rate of 0.3% for Q4, reflecting an improvement from the previous quarter’s flat performance.
Looking ahead, preliminary German HICP figures are anticipated to indicate a 0.2% decrease in January, although yearly inflation is projected to remain stable at around 2%. In contrast, US PPI figures are expected to cool slightly to a yearly growth of 2.7%, from 3% in the previous month, while core PPI is seen easing to 2.9%.
On the technical front, the EUR/USD pair is under pressure, with bearish momentum visible as recent price action displays lower highs. Support at 1.1895 remains critical, as a break below this level could intensify selling pressures. Conversely, resistance levels are established near the psychological landmark of 1.2000, along with a high of 1.2082 reached on January 27.
As market participants navigate through these evolving dynamics, the interplay between Eurozone data releases, US economic indicators, and central bank policy expectations is likely to shape currency movements in the coming days.
