The euro once again failed to push through US$1.12 before sinking lower versus the US dollar on Tuesday. The euro US dollar exchange rate closed the previous session 0.4% lower at US$1.1154. The euro was advancing versus the US dollar in early trade on Wednesday.
The euro traded broadly lower versus its major peers on Tuesday despite a slew of encouraging data from the eurozone. The inflation rate jumped from 1% year on year in November to 1.3% year on year in December. Rising oil prices played a central role in the increase in inflation. However, core inflation, which strips out more volatile items such as food and fuel has also remained at 1.3% for two straight months now.
November’s retail sales for the bloc were also worth cheering. Retail sales increased 1% month on month a sharp increase from October’s -0.3% decline. Whilst this is a notable improvement it is also worth highlighting that the data includes Black Friday.
Analyst consider that it is premature to predict a sustained rise in core inflation, particularly as wage pressures have been moderating recently. Whilst 1.3% core cpi is cheered it is still a significant distance from the European Central Bank’s 2% target.
Today the eurozone economic calendar will remain in focus with the release of German factory orders and eurozone business confidence. Analysts are expecting to see an improvement in both readings.
No Causalities Is Risk Supportive News
The US gained in the previous session as tensions between the US and Iran remained elevated. Overnight Iran attacked the second largest US military base in Iraq. The White House has said that it will do whatever it takes to protect US personnel, partners and allies. There is no mention of buildings or objects. Given that there are no reported causalities, investors playing down the prospect of a US counter retaliation.
Today investors will continue to monitor developments in the Middle East and most importantly Trump’s response. US ADP private payroll data could also grab the attention of investors ahead of Friday’s non-farm payroll report.
|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.