EUR/USD is steady as we start the new trading week. In Monday’s European session, the pair is trading around the 1.3030 line. The euro rocketed in mid-week, gaining about 350 points as the Federal Reserve indicated that QE tapering was not imminent. On Friday, US PPI hit a nine-month high, but UoM Consumer Sentiment missed the estimate. Taking a look at Monday’s events, there are no releases out of the Eurozone today. In the US, there are two key releases – Retail Sales and Core Retail Sales. The markets are anticipating improved numbers from both.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
Asian session: Euro/dollar was very quiet to start off the week. The pair stayed close to the 1.3050 line and consolidated at 1.3064. In the European session, Euro/dollar has edged lower.
US Consumer Sentiment Misses Estimate: The markets would have liked to wrap up last week with a strong US release, but it was not to be, as UoM Consumer Sentiment disappointed. The key indicator did rise from 82.7 points to 83.9, but this fell well short of the estimate of 85.3 points. However, the markets were in a forgiving mood on Friday, and the dollar was not hurt by these numbers. The reason? Analysts noted that the indicator remains at a high level, even though it missed the forecast. As well, the release noted that inflation is expected to rise, and expectations were up sharply.
Euro retracts after spectacular gains: The euro took full advantage of broad dollar weakness last Wednesday, as the Federal Reserve poured cold water on expectations that QE tapering was just around the corner. FOMC minutes from the June policy meeting indicated that Federal Reserve policymakers were closely split over when to scale down the current round of QE, in which the Fed purchases $85 billion in assets each month. About half of the policymakers favor commencing tapering before the end of 2013, while others feel that the labor market is still too weak. The dollar was broadly weaker as a result, and the euro took full advantage, posting gains of some 350 points. However, the euro has since coughed up some of those gains as the dollar continues to rebound. Is 1.30 the next stop for the greenback, or will the euro rebound?
ECB says low rates to continue: The ECB continues to send out signals that interest rates will be maintained or even cut. On Thursday, the ECB stated in its monthly bulletin that it expects rates to be maintained over even lowered, but remained “flexible” about its low rate policy, with inflation being a key factor in any future moves. ECB policymaker Jens Weidmann echoed these sentiments. saying that the ECB’s monetary policy depended on economic conditions in the Eurozone. Low rates are bad for the euro, as many investors could end up parking their funds elsewhere if the rates are more attractive elsewhere.
Kenny Fisher - Senior Writer
A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.
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