Forex News
- EUR/USD weakened as Germany’s Retail Sales dropped 0.9% MoM, missing expectations for a 0.2% decline.
- US Dollar strengthens as risk aversion rises following coordinated US-Israel strikes on Iran.
- The Greenback gains support as strong inflation signals tariff pass-through, dimming prospects for Fed rate cuts.
EUR/USD declines nearly 1%, trading around 1.1740 during the European hours on Monday. The pair struggles as the Euro (EUR) remains under pressure after Germany’s Retail Sales fell 0.9% month-over-month (MoM) in January, undershooting expectations for a 0.2% decline and reversing an upwardly revised 1.2% increase in the previous month. On an annual basis, retail sales rose 1.2%, slowing from December’s upwardly revised 2.5% gain, which had been the strongest pace in five months. Retail sales increased 2.7% in 2025 overall.
Moreover, the HCOB Germany Manufacturing Purchasing Managers’ Index (PMI) rose to 50.9 in February from 49.1 in January. The HCOB Eurozone Manufacturing PMI was confirmed at 50.8, up from 49.5. Both readings marked the strongest levels in 44 months.
The risk-sensitive EUR/USD pair plunged as the US Dollar (USD) gained ground amid increased risk aversion following the United States (US) and Israel's coordinated attack on Iran over the weekend. The joint US-Israeli operation reportedly killed Supreme Leader Ayatollah Ali Khamenei, marking a pivotal moment for Iran. US President Donald Trump said US military operations in Iran are “ahead of schedule,” according to CNBC.
On the United States (US) side, traders await the ISM Manufacturing Purchasing Managers’ Index (PMI) due later in the day, which is expected to inch lower to 52.3 in February, from the previous 52.6 reading. ISM Manufacturing Employment Index data will also be eyed.
The US Dollar also receives support as stronger-than-expected US inflation data suggested firms are passing tariff costs on to consumers, further clouding the outlook for Federal Reserve rate cuts. However, Fed Governor Stephen Miran called for significant interest rate cuts as soon as possible, arguing that underlying price pressures remain subdued and that persistently high rates reflect distortions in inflation measurement.
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% 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.
Silver prices (XAG/USD) rose on Monday, according to FXStreet data. Silver trades at $95.59 per troy ounce, up 1.90% from the $93.81 it cost on Friday.
Silver prices have increased by 34.48% since the beginning of the year.
Unit measure | Silver Price Today in USD |
|---|---|
Troy Ounce | 95.59 |
1 Gram | 3.07 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 56.52 on Monday, up from 56.11 on Friday.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
(An automation tool was used in creating this post.)
MUFG’s Lee Hardman highlights that Brent briefly spiked above USD 82 before slipping back under USD 80 as traders assess Middle East supply risks. He notes tanker traffic through the Strait of Hormuz has largely halted and expects a geopolitical risk premium in Oil prices to persist, with potential macro consequences skewed against Asia and Europe.
Strait of Hormuz disruption drives risk premium
"The price of Brent initially jumped to a high of USD82.37 overnight but has since dropped back below USD80/barrel in response to heightened fears over the potential disruption to global oil supply."
"According to Bloomberg, tanker traffic though the Strait of Hormuz has largely halted, with a self-imposed pause in place by shipowners and traders as the conflict spreads within the Middle East."
"The Strait of Hormuz is an important choke point for the global economy given that about a fifth of the world’s oil and liquefied natural gas typically flows through every day."
"For now takers are continuing to pile up outside the waterway as companies wait for clarity on the security situation."
"Market participants are likely to continue to price in a geopolitical risk premium into the price of oil for the foreseeable future."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Nomura’s Senior European Economist Andrzej Szczepaniak assesses how recent moves in crude Oil, Natural Gas and EUR/USD following the US/Israel conflict with Iran could affect euro area HICP and ECB expectations. He notes that current Oil and Gas price gains versus the ECB’s December 2025 assumptions may only marginally lift rate hike pricing into 2026–2027, leaving policy reaction limited for now.
Inflation impact and rate expectations
"For the ECB, the focus will be on how pronounced and persistent recent crude oil and natural gas price moves are, as well as how they will affect euro area HICP inflation."
"However, it’s important to take this in the context of where the ECB had assumed crude oil and natural gas prices in their December 2025 forecasts, and also the extent to which the fall in EUR/USD, albeit marginal, will amplify these inflationary pressures. "
"Markets are likely to marginally raise expectations for rate hikes by December 2026 and December 2027, without necessarily fully pricing any additional hikes (i.e., the cumulative change in pricing by Dec 2027 will be meaningfully less than 25bp)."
"The rise in 1y HICPxt inflation pricing, rising to 1.97% from 1.80%, and 2y HICPxt inflation pricing, rising to 1.91% from 1.77%, suggests markets believe the rise in oil prices will be contained and also maybe that the conflict will to some extent be short-lived."
"Ultimately, we believe recent moves are contained enough so far to ensure the ECB does not do anything reactionarry in the near-term – recall, the ECB had forecast HICP inflation would undershoot its target from Q3 2026 to Q4 2027."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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