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Euro climbs after unexpected rise in German trade surplus

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The EURUSD pair saw a slight lift on Wednesday, trading in the 1.0860s against the US Dollar, following the release of strong German trade data, which showed a greater-than-expected rise in the country’s trade surplus.

Germany’s trade balance rose to €27.8 bln in January, beating estimates of €21.5 bln and the previous surplus of €23.3 bln, according to official SBD data.

The release suggests more demand for Euros from foreign importers of German goods. It follows strong Eurozone PMI data released on Tuesday, and contrasts with lacklustre US factory and PMI data, which has taken the wind out of the Dollar’s sails.

Euro gains appeal

The Euro is the most popular currency among global central banks, the big fish players in the currency markets, according to a recent survey by a London-based think tank.

Roughly 15 central banks anticipate increasing their reserves of Euros in 2024-25, according to a survey of 75 major central bank reserve managers by the think tank OMFIF.

“Net demand was higher than for any other currency during the period and a jump from the 2021 and 2022 surveys of reserve managers controlling nearly $5 trln,” said a report by Reuters, citing the survey.

The resurfacing of Eurozone bond yields into positive territory after years of negative rates, as well as a relatively more robust outlook going forward – despite expectations of interest rate cuts – was the reason given by central bankers for their pursuit of the Euro.

On the horizon

Eurozone Retail Sales data later Wednesday is expected to show a slide of 1.3% in January YoY, but a 0.1% rise MoM. A much higher than expected reading would be positive for the Euro.

The key event for the week, however, is the European Central Bank policy meeting on Thursday.

Analysts are looking for a shift in communication: so far, the ECB has kept schtum about when it anticipates cutting rates, in contrast with less reserved peers. However, some analysts suggest March could be the time it throws caution to the wind.

EUR to enjoy further gains – Scotiabank

Economists at Scotiabank said the technical trend in the EURUSD pair remains positive, even with gains still blocked by resistance at 1.0880/1.0890.

“Steady gains from the mid-February low have the support of strong, bullish momentum on the intraday and daily DMI studies. The weekly DMI is moving into bullish territory as well.

“A daily close above 1.0865 or a clear and sustained push through 1.0890 should drive more EUR gains towards 1.1000/1.1100. Support is at 1.0840 and 1.0800,” they said.

(Source: OANDA)