The euro US dollar traded flat for a good part of Tuesday’s session. Later in the US session, the euro pushed higher versus the greenback. The pair closed the day up 0.1% at US$1.1022, at the top end of the day’s trading range. The pair is trending lower in early trade on Wednesday.
The euro pushed higher in the previous session after German consumer confidence figures exceeded analysts’ expectations. Data showed German household sentiment is expected to increase 9.7 points in December, up from 9.6 in November. According to Gfk Consumer Confidence specialist Rolf Burkl “the exceptionally high levels of consumer confidence among German consumers have significantly contributed to preventing a recession in Germany in the third quarter”. This is some welcomed good news before the crucial festive shopping period.
Germany narrowly avoided a recession in the third quarter. The Germany economy grew 0.1% in Q3, after contracting in the second quarter. Whilst recent data is suggesting that the German economy is bottoming out, there are few signs, if any of Europe’s largest economy actually rebounding.
Today there is no high impacting eurozone macro data to grab investors’ attention and drive the euro. Instead the euro is likely to be moved by the dollar.
German Inflation on Thursday To Hit Euro?
Looking ahead towards Thursday, German inflation data could drag on the euro. Analyst are forecasting that German inflation decreased -0.6% month on month in November. The weak inflation reading would be despite the European Central Bank easing policy in September by cutting the overnight interest rate and restarting the bond buying programme. More patience is needed to see whether the ECB’s measures are sufficient. A speech today by ECB Chief Economist Lane will be closely watched, for further clues as to where the ECB sees monetary policy going.
Dollar Slips On Consumer Confidence, US GDP Up Next
The dollar slipped lower in the US session following the release of disappointing US consumer confidence figures. Data from the Conference Board showed hat consumer confidence declined for a fourth straight month in November, raising concerns over the strength of the US economy in the final quarter of the year.
Consumer confidence unexpectedly fell to 125.5, down from 126.1 in October and well short of the 127 that analysts had pencilled in. That said, the number for November remains high on a historical basis. The data supports the idea that the US consumer is holding up well. This is particularly important because in 2020 the US consumer will be responsible for US economic growth whilst the US manufacturing sector continues to slowly recover from its recent slump.
Whilst the US consumer confidence data disappointed, new US homes sales impressed, posting best 2 months in 12 years. The figures added to signs of sturdy housing demand thanks to lower prices and borrowing costs.
GDP, Inflation, Durable Goods
Today is the final full trading data of the week for US traders, ahead of the Thanksgiving break on Thursday and part of Friday. Whilst the dollar will continue to trade it will be very quiet.
Today there is a sew of US data to keep investors occupied. These include US GDP stats, inflation as measured by the Fed’s preferred measure the Personal Consumption Expenditure (PCE) and durable goods. Analysts are expecting the second revision of Tthird quarter GDP to remain stray at 1.9%.
Analysts are expecting US durable goods and inflation to show an improvement from last month and be supportive of the dollar.
Broadly data from the US has been mixed in recent months. Some US data is impressing, and some US data is disappointing. However, the overall picture is best gauged looking at US labour market data. Last year monthly job creation was in the region of 200,000. Now that figure is closer to 100,000. Job creation of 100,00 is till sufficient to keep the unemployment level close to its current levels, around a 15-year low and to keep wage growth rising at a robust pace of around 3%. Growth at this level, whilst much slower than last year will still keep consumers confident and spending.
For the dollar this means that the Fed is unlikely to be cutting interest rates. However, the central bank won’t be raising them either. This is the message that Federal Reserve Chair Jerome Powell has been giving to the market in recent appearances and one that Fed speakers are likely to reinforce across today’s session.
Trade headlines are still relevant, although trade fatigue is setting in with investors. President Trump’s comments that the US is in the final those on reaching a trade deal with China saw a muted reaction from the dollar. This is because a lot has been said in recent sessions but very little done.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 EUR = 1.12829 USD
Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.
Or, if you were looking at it the other way around:
1 USD = 0.88789 EUR
In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.