The euro has climbed sharply against the US dollar in Thursday trading. EUR/USD has gained about one cent so far, as the pair trades in the low-1.36 range. The government shutdown and debt limit crisis are finally over. With just hours to spare before the debt ceiling was reached, the Senate and House of Representatives voted on Wednesday to fund the government and raise the debt ceiling. In economic news, Eurozone Current Account improved, but fell short of the estimate. In the US, there are two major releases on the schedule – Unemployment Claims and the Philly Fed Manufacturing Index.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- In the Asian session, EUR/USD moved higher, consolidating at 1.3556. The pair has climbed sharply in the European session, barreling past the 1.36 line.
- Current range: 1.3570 to 1.3650.
- Below: 1.3570, 1.3500, 1.3460, 1.3415, 1.3325, 1.3240, 1.3175, 1.31, 1.3050 and 1.3000.
- Above: 1.3650, 1.3710, 1.3800, 1.3870, 1.3940 and 1.40.
- On the downside, 1.3570 has reverted to support. 1.3500 follows.
- 1.3650 is providing weak resistance. 1.3710 is next.
- 8:00 Eurozone Current Account. Exp. 17.7B. Actual 17.4B.
- 12:30 US Unemployment Claims. Exp. 357K.
- 14:00 US Philly Fed Manufacturing Index. Exp. 15.4 points.
- 16:45 US FOMC Member Charles Evans Speaks.
- 16:45 US FOMC Member Esther George Speaks.
* All times are GMT.
For more events and lines, see the Euro to dollar forecast.
- US Avoids Default: With the US staring at a sovereign default for the first time in its history, the Republicans and Democrats finally reached an agreement on Wednesday to reopen the government and raise the debt ceiling. The agreement passed by wide margins in both the Senate and House. However, the deal provides short-term relief only – the government will be funded until January 15, while the debt limit will be raised until February 7. Both sides agreed to discuss budget issues and try to reach a long-term agreement before December 13. The Republicans appear to be the losers in this episode, as they failed to obtain any concessions regarding the Obama Health Care Act and are blamed by most of the public for precipitating an unnecessary political and fiscal crisis.
- Crisis takes bite out of US economy, credibility: After weeks of finger pointing and political brinkmanship, Congress finally got its act together and voted to fund the government and raise the debt ceiling. The shutdown, which lasted for over two weeks and temporarily threw hundreds of thousand of federal employees out of work, is estimated to have cost the economy $24 billion. The cost of the debt crisis is harder to quantify, but has certainly eroded faith in the US economy. This was underscored by a warning from Fitch Ratings on Tuesday, when the agency put US debt on a negative watch. Fitch stated that the crisis had cast doubt over the credit of the United States and had undermined confidence “in the role of the US dollar as the pre-eminent global reserve currency”.
- Markets Eye US Unemployment Claims: With the market’s attention on the crisis in Washington, US economic releases, even major events, have been shunted to the backburners. However, Thursday’s US Unemployment Claims is a key release that could affect the US dollar. With major releases such as Non-Farm Payrolls suspended to the US shutdown, Unemployment Claims has magnified in its importance. Last week’s release was not considered accurate due to technical problems, so Thursday’s numbers are being eagerly awaited. The markets are bracing for another weak release, with an estimate of 357 thousand.
- Eurozone inflation remains low: This week’s inflation indicators continue to point to weak inflation in the Eurozone. Eurozone CPI dropped from 1.3% to 1.1% in September, while Eurozone Core CPI edged lower, from 1.1% to 1.0%. Both indexes matched expectations. The inflation numbers point to sluggish economic activity and continue to be a source of concern for Eurozone policymakers.
- German coalition talks hit snag: German Chancellor Angela Merkel rolled to an easy victory in last month’s elections, but that was the easy part. Merkel continues to have difficulty forming a coalition, and has been unable to reach an agreement with the Greens party. This leaves the Social Democrats as her sole potential partner and the negotiations are expected to be protracted.