EUR/USD rises as US Dollar drops at the start of Fed policy decision week
By: bitcoin ethereum news|2025/05/05 16:30:02
0
Share
EUR/USD moves higher to near 1.1325 as the US Dollar faces selling pressure ahead of the Fed’s monetary policy meeting on May 6-7. US President Trump said he is confident about closing trade deals this week. The ECB is expected to continue lowering interest rates despite the increase in Eurozone inflation in April. EUR/USD trades slightly higher to near 1.1325 during the European trading hours on Monday, further gaining ground after touching a three-week low of 1.1265 late last week. The major currency pair rises as the US Dollar (USD) on persistent uncertainty over United States (US)-China trade relations and as investors turn cautious ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops to near 99.80 but is trading inside Friday’s range. Over the weekend, US President Donald Trump expressed confidence while speaking with reporters that bilateral trade deals with some of his trading partners could be announced this week. However, he confirmed not having any dialogue with Chinese leader Xi Jinping this week, but didn’t deny any ongoing trade discussions between officials from both nations. While the announcement of bilateral trade deals by Washington would indicate that fears of tariffs proposed by US President Trump have peaked now, the long-lasting standoff between the world’s two largest powerhouses will continue to keep investors on their toes. This week, the major trigger for the US Dollar will be the Federal Reserve’s (Fed) monetary policy meeting, which will be announced on Wednesday. The Fed is widely anticipated to leave interest rates unchanged in the range of 4.25%-4.50%. Therefore, investors will pay close attention to the monetary policy statement and Fed Chair Jerome Powell’s press conference to get cues about the interest rate outlook. Better-than-expected Nonfarm Payrolls (NFP) data for April and elevated consumer inflation expectations in the face of Donald Trump’s tariff policy will be a limiting factor for the Fed to reduce interest rates. Daily digest market movers: EUR/USD gains as USD faces pressure EUR/USD gains at the expense of the US Dollar. The Euro (EUR) trades broadly flat while traders are increasingly confident that the European Central Bank (ECB) will reduce interest rates again in the June policy meeting despite hotter-than-expected Eurozone Harmonized Index of Consumer Prices (HICP) data for April. The data showed on Friday that the core HICP – which excludes volatile components like food, energy, alcohol, and tobacco – grew at a faster pace of 2.7% compared to estimates of 2.5% and the March reading of 2.4%. In the same period, the headline HICP rose steadily by 2.2% on year, faster than estimates of 2.1%. Traders continue to bet supporting more interest rate cuts from the ECB as they are more concerned about the Eurozone economic outlook due to the fallout of Donald Trump’s protectionist policy than the slight increase in inflationary pressures. On Friday, ECB Vice President Luis de Guindos expressed confidence in an interview with Austria’s Die Presse newspaper that the central bank could continue reducing interest rates, Reuters reported. “It depends on how inflation develops. But we can be optimistic here,” de Guindos said, after being asked how long the ECB will continue reducing interest rates. In Monday’s session, the EUR/USD pair will be influenced by the US final S&P Global and ISM Services Purchasing Managers’ Index (PMI) data for April. The ISM Services PMI is expected to come in lower at 50.6 from 50.8 in March, signaling that the services sector grew at a moderate pace. Technical Analysis: EUR/USD recovers above 1.1300 EUR/USD holds recovery above the key level of 1.1300 on Monday from its three-week low of 1.1265 posted on Thursday. The major currency pair rebounded after attracting bids near the 20-day Exponential Moving Average (EMA) around 1.1260. The 14-day Relative Strength Index (RSI) falls inside the 40.00-60.00 range, indicating that the bullish momentum has concluded for now. However, the upside bias still prevails. Looking up, the psychological level of 1.1500 will be the major resistance for the pair. Conversely, the 25 September high of 1.1214 will be a key support for the Euro bulls. Euro FAQs The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%). The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde. Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money. Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy. Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance. Source: https://www.fxstreet.com/news/eur-usd-rises-as-us-dollar-drops-at-the-start-of-fed-policy-decision-week-202505050759
You may also like

Uncovering YZi Labs 229 Investment: Over 18% of the portfolio is already inactive, with an average project transparency score of 78
In terms of strategic direction, YZi Labs has begun to extend into areas such as AI and stablecoins, but overall it is still in the layout and validation stage.

The business of crypto VC is becoming promising
Homogenized industries are ultimately fragile; only when different species can emerge does the market truly come alive.

China's AI Compute Power Counterstrike
The cost itself is the progress.

Global Assets Plunge: Hormuz, Chips, and a South Korean Holiday
The Dollar Wins, Everyone Else Loses

Bloomberg has reported twice, Hyperliquid once again in Wall Street's radar
Weekend Front-Running

Trump Backs Crypto Bill, SEC Halts Leveraged ETF, What Is the English-Speaking Crypto Community Talking About?
What Was Hot in the Last 24 Hours Among Expats?

OpenClaw Floods Into Polymarket, Some Making Tens of Thousands Per Month
Are you ready to venture into Polymarket and dive into the shrimp farming craze?

Understanding Trump's "Warfare Playbook": Ten Signals Investors Must Know
Debriefing Trump's series of conflicts over the past year, this article outlines ten stages of Trump's conflict strategy, revealing the underlying logic between war, market fluctuations, and eventual negotiation.

Iranian Missile Heading Toward UAE, Claude Also Within Range
On March 1st, an Iranian missile struck an Amazon data center in the UAE. On the same day, Claude experienced a worldwide outage.

Successive Core Team "Heroes" Depart, Has Aave's DAO Dream Crumbled?
「This is not a matter of right or wrong, but rather a situation where existing governance mechanisms have not provided an effective resolution when interests and positions are misaligned.」

Is This the Year of the Robot? A Deep Dive into Robotics Projects
What are some noteworthy projects in the Robotic Race track?

When AI Takes Over Money: Bitcoin Becomes the "First Choice," Fiat Is Left Out
AI's view on "what makes a good currency" is already quite consistent.
AI Trading in Live Markets: 4 Lessons From a WEEX Hackathon Top 10 Finalist
AI trading meets real markets. Explore 4 lessons from a WEEX Hackathon Top 10 finalist on surviving volatility, trusting AI models, and building smarter crypto trading systems.

MegaETH Co-founder: 48 Hours After Leaving Dubai, I Reassessed the Entire Crypto Space
In an era of technological upheaval, rather than pursuing the "legitimacy" co-opted by power, it is better to sharpen the blade and build parallel systems that truly expand individual sovereignty.

Web3 Winter Mass Exodus: Resignations, Closures, Transformations, and Acquisitions
The intense collision between technology and capital, products and markets, vision and reality, each story reflects the confusion and unwillingness of the market participants.

Key Market Information Discrepancy on March 4th — A Must-Read! | Alpha Morning Report
1. Top News: Strait of Hormuz Emerges as Flashpoint in US-Iran Standoff, US Stocks Trim Losses, Asia-Pacific Markets Open Sharply Lower, Cryptocurrencies See Slight Recovery
2. Token Unlock: None

During the weekend market closure, Hyperliquid more accurately predicted the Gold reopening price than Binance
When markets are closed and real-time pricing is needed due to geopolitical risks, Hyperliquid takes the lead and is closer to the eventual futures reopening price.

OpenClaw thrusts crypto project Venice.ai into the spotlight as its token VVV surges over 500% in a single month
Openclaw Founder Advises Young People "Not to Waste Time on Cryptocurrency," Yet in its official documentation, it lists the cryptocurrency project Venice.ai as a recommended model provider.
Uncovering YZi Labs 229 Investment: Over 18% of the portfolio is already inactive, with an average project transparency score of 78
In terms of strategic direction, YZi Labs has begun to extend into areas such as AI and stablecoins, but overall it is still in the layout and validation stage.
The business of crypto VC is becoming promising
Homogenized industries are ultimately fragile; only when different species can emerge does the market truly come alive.
China's AI Compute Power Counterstrike
The cost itself is the progress.
Global Assets Plunge: Hormuz, Chips, and a South Korean Holiday
The Dollar Wins, Everyone Else Loses
Bloomberg has reported twice, Hyperliquid once again in Wall Street's radar
Weekend Front-Running
Trump Backs Crypto Bill, SEC Halts Leveraged ETF, What Is the English-Speaking Crypto Community Talking About?
What Was Hot in the Last 24 Hours Among Expats?