EUR/USD has fallen sharply, shedding close to a cent in Thursday trading. The euro took a hit after minutes from the Federal Reserve’s most recent meeting showed that members discussed winding down the current round of QE. There was more bad news for the euro, as French, German and Eurozone PMIs all fell below the estimate. Later in the day, the results of the Spanish 10-year Bond Auction will be released. In the US, it’s a very busy Thursday, with four major releases – Core CPI, Unemployment Claims, Existing Home Sales and the Philly Fed Manufacturing Index.
- Asian session: Euro/dollar was own, touching a low of 1.3236. The pair consolidated at 1.3256. In the European session, Euro/dollar continues to lose ground, and is testing the 1.32 line.
- Current range: 1.34 to 1.3486.
- Below: 1.3170, 1.3130, 1.3110, 1.3030, 1.30 and 1.2960.
- Above: 1.3255, 1.3290, 1.3360, 1.34, 1.3486, 1.3588, 1.3690 and 1.3740.
- The pair is receiving support at 1.3170. The next support level is 1.3130.
- On the upside, 1.3255 is the next line of resistance.
Euro/dollar falls after Fed minutes, weak PMI data – click on the graph to enlarge.
- 8:00 French Flash Manufacturing PMI. Exp. 43.9 points. Actual 43.6 points.
- 8:00 French Flash Services PMI. Exp. 44.5 points. Actual 42.7 points.
- 8:30 German Flash Manufacturing PMI. Exp. 50.4 points. Actual 50.1 points.
- 8:30 German Flash Services PMI. Exp. 55.5 points. Actual 54.1 points.
- 9:00 Eurozone Flash Manufacturing PMI. Exp. 48.4 points. Actual 47.8 points.
- 9:00 Eurozone Flash Services PMI. Exp. 49.2 points. Actual 47.3 points.
- Tentative: Spanish 10-year Bond Auction.
- 13:30 US Core CPI. Exp. 0.2%.
- 13:30 US Unemployment Claims. Exp. 353K.
- 13:30 US CPI. Exp. 0.1%.
- 14:00 US Flash Manufacturing PMI. Exp. 55.6 points.
- 15:00 US Existing Home Sales. Exp. 4.89M.
- 15:00 US Philly Fed Manufacturing Index. Exp. 1.1 points.
- 15:00 US Mortgage Delinquencies.
- 15:00 US CB Leading Index. Exp. 0.2%.
- 15:30 US Natural Gas Storage. Exp. -119B.
- 16:00 US Crude Oil Inventories. Exp. 1.9M.
- 17:30 US FOMC James Bullard Speaks.
For more events and lines, see the Euro to dollar forecast
- Federal Reserve mulls ending QE4: The Federal Reserve released the minutes of its most recent FOMC meeting on Wednesday. The minutes indicated that policymakers had discussed slowing or event stopping the current round of QE before the US employment situation brightens, due to concern about the negative effect that QE could have on the financial markets. Previously, the Fed had stated that the current round of QE would remain in effect until unemployment dropped to 6.5%. The Fed has been purchasing a record amount of assets, trying to bolster the US economy, which contracted by 0.1% in Q4 of 2012. The Federal Reserve has kept its benchmark interest rate close to zero and expanded its balance sheet to over $3 trillion, but the economy has been slow to respond. The currency markets reacted quickly to the news, as the euro fell sharply against the US dollar.
- Disappointing PMIs across Eurozone: Thursday’s PMI data out of Europe was dismal, as Services and Manufacturing PMIs from France, Germany and the Eurozone failed to reach their estimates. With the exception of the German data, the indicators were below the 50 point threshold. This indicates contraction in the services and manufacturing sectors, and raises concerns about the health of the Eurozone economy. The weak data has hurt the euro, which has dipped below the 1.32 line.
- Draghi discusses euro: Earlier this week, ECB chief Mario Draghi testified before the European Parliament Committee on Economic and Monetary Affairs. Draghi said that the Eurozone is stable, but acknowledged that the economy was weak after three straight quarters of negative growth. He reiterated that he expects the Eurozone to show improvement later in 2013. Draghi also touched on the hot topic of currency exchange rates. He repeated his concern that the high value of the euro could impact on the ECB’s inflation outlook, but sought to reassure his listeners that the euro’s exchange rate was not a policy target.
- G-20 issues statement on exchange rates: The volatility we are witnessing in currency exchange rates have become a hot topic, and the G-20 addressed this issue at its recent meeting, although it was careful not to ruffle any feathers. The leaders pledged not to “target our exchange rates for competitive purposes”, and to move more rapidly to market-determined exchange rate systems. The G-20 statement did not make reference to Japan, which has come under fire for monetary policies which have led to free-fall in the value of the Japanese yen. The G-20 also stated that more effort was needed to continue to strengthen the Eurozone, by building a stronger economic and monetary union.