Euro Gains Momentum Ahead of German Trade Balance Report

EUR/USD extended its rise for a second consecutive day, hovering around 1.1430 during Asian trading hours on Thursday. The euro received support against the U.S. dollar as market participants awaited the release of Germany’s trade balance data later in the day, with attention also turning to Friday’s Harmonized Index of Consumer Prices (HICP) reading.

The U.S. dollar underperformed after the Federal Reserve’s June meeting minutes revealed a growing divide among policymakers during Kevin Warsh’s first FOMC meeting on June 16–17. While some committee members expected the benchmark rate—currently at 3.50% to 3.75%—to remain unchanged or lower by year‑end, a hawkish faction argued that persistent price pressures would necessitate a rate hike before the year closes. This internal disagreement reinforced expectations that the Fed will keep rates higher for longer to combat stubborn inflation.

Reflecting the more hawkish outlook, the CME FedWatch tool showed swap traders pushing the probability of a rate increase at the upcoming Fed meeting above 30%, a sharp rise from less than 20% just a week earlier. The greenback’s decline was also tempered by heightened safe‑haven demand amid escalating geopolitical tensions between the U.S. and Iran. Following renewed U.S. military strikes, Iranian Parliament Speaker Mohammad Bagher Ghalibaf warned that any further American action would trigger immediate retaliation, reiterating Iran’s firm control over the strategic Strait of Hormuz. The threat amplified market concerns about energy‑driven supply shocks and a resurgence of global inflation.

Euro FAQs

The Euro is the currency for the 20 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% of 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 indicator 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.

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