After rallying 0.5% at the start of the week the euro was in consolidation mode vs US dollar on Tuesday. The pair pushed to a high of US$1.1093, before easing back to close at approximately the same level that it had started the day at. The pair is slipping lower in early trade on Wednesday.
The euro traded flat across the board in the previous session, even as investors digested better than forecast producer price index (PPI) data. PPI unexpectedly increased 0.1% month on month in November, above the -0.1% decline in October. PPI is a leading indicator for consumer prices. Therefore, a tick higher in PPI is a promising sign for consumer inflation and a less dovish monetary policy. The euro advanced following the reading.
Today investors will continue watching the eurozone economic calendar. Eurozone and German service sector pmi will be under the spotlight. Analysts are expecting activity in the service sectors in the eurozone and Germany to have remained steady in November, in expansion territory. Any signs that the slump in the manufacturing sector is spilling over into the service sector could unnerve euro investors. On the other hand, should the data support the theory that the slowdown in Germany and the eurozone is bottoming out, the euro could push higher as a stronger economy goes hand in hand with a less dovish central bank.
US Service Sector & ADP Data In Focus
The dollar trended lower in the previous session as the self-proclaimed “tariff man” Trump continued to threaten on several fronts. Whilst in London for the NATO meeting, Trump announced that he is more than prepared to wait until after the US elections in 2020 to agree a trade deal with China. His comments dashed hopes of a phase one trade deal being agreed in the coming weeks, sending the dollar southwards. Investors will be watching closely to see whether Trump applies the set of tariffs due to start on 15th December on Chinese imports.
In addition to China, France was also in the firing line on Tuesday. President Trump threatened 100% tariffs on $2.4 billion worth of French produce in retaliation for France’s digital tax. The US trade representative’s office consider France’s digital tax to be unfairly discriminatory against US technology firms. Risk off sentiment is underpinning the dollar on Wednesday.
Trade headlines will remain in focus. Investors will also look towards a barrage of US data. The most keenly awaited will be ISM non-manufacturing numbers and the ADP private payroll figures. Any signs of weakness seeping into the service sector could ignite fears over the health of the US economy and the need for further monetary policy easing, sending the dollar drop sharply.
|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.