The euro closed 0.25% higher versus the US dollar in the previous session. The pair closed Tuesday at US$1.1093. The dollar is edging higher in early trade on Wednesday.
The euro trended higher in the previous session following stronger than forecast ZEW sentiment data in both Germany and the eurozone. German investors sentiment improved to the highest level in two years in November. The improved outlook comes amid growing optimism that US — China trade tensions are easing. The German sentiment index jumped from -2.1 to a better than expected 10.7. This was the first positive reading since April.
The ZEW data, along with unexpectedly strong German export data earlier in the week has helped boost optimism that Germany will avoid a contraction again in the fourth quarter. There are signs that the slowdown in Europe’s largest economy could be bottoming out.
There is no high impacting eurozone data due to be released today. The euro will trade at the will of the US dollar.
Fed To Keep Rates On Hold
The dollar has had a quiet start to this week owing to a lack of economic data releases and as investors wait for clues as to whether Trump will hike tariffs on Chinese imports on 15th December. However, volatility is expected to pick up today as investors look towards US inflation data and the Federal Reserve monetary policy announcement.
The dollar could get a boost from inflation data. Analysts are expecting that consumer prices increased 2% year on year in November. This is up from 1.8% in the previous month. Core inflation, which excludes more volatile items such as food and fuel is expected to remain steady at 2.3%. Both these figures at or above the central bank’s 2% target level.
Strong inflation data in addition to the impressive labour market data last week suggests that the Fed’s assessment of the US economy could be accurate, the economy is showing signs of being on a firm footing.
The Federal Reserve will be under the spotlight as the FOMC will make their rate announcement. After cutting interest rates three times this year the Fed is not expected to cut rates again; policy makers believe that they have done enough to support the economy. Investors will watch the press conference and the dot plot closely.
|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.