- Euro fails to capitalize on upbeat IFO data.
- Inflation in eurozone remains muted toward end of 2919.
- US Dollar Index extends technical rebound toward 97.50.
The EUR/USD pair registered its highest daily close since early November at 1.1151 on Tuesday but failed to preserve its bullish momentum. The broad USD strength and the shared currency’s uninspiring performance on Wednesday caused the pair to erase the gains it posted on Monday and Tuesday. As of writing, the pair was down 0.28% on the day at 1.1118.
EUR struggles to find demand
Earlier in the day, the IFO’s Current Assessment Index improved to 98.8 in Germany to beat the market expectation of 98.1. Additionally, the Business Climate Index and Expectations Index both came in higher than analysts’ estimates. However, the shared currency couldn’t take advantage of the upbeat data.
Commenting on the data, “this positive IFO reading brings a conciliatory end to the economic year 2019. It ends the year on a positive note and with the hope for a rebound in 2020,” said ING analysts. “However, as much as we would like to see the German economy leaving the stagnation territory behind, truth is that any tangible bottoming out is still hard to find.”
Other data from the eurozone revealed that inflation, as measured by the core Consumer Price Index (CPI), remained steady at 1.3% on a yearly basis in November as expected.
In the meantime, escalating trade tensions between the EU and the US seem to be hurting the EUR as well. On Tuesday, “we can’t get global US trade deficit down without reducing the trade deficit with Europe,” Trade Representative Lighthizer told Fox Business Network. “We have a basic trade problem with Europe, we have to find ways to sell more goods to the EU.”
On the other hand, the greenback continued to gather strength against its major peers on Wednesday as part of the ongoing technical correction and weighed on the pair. The US Dollar Index advanced to its highest level in a week at 97.48 and was last up 0.27% on the day at 97.45.
Technical levels to watch for
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