The euro ended trading on Tuesday at roughly the same level that it had started the session at. Whilst strong German ZEW sentiment data boosted the common currency early on, a strengthening dollar in the US session brought the pair back towards the flat line, just under US$1.11. The pair continues to trade below $1.11 as investors look towards the European Central Bank (ECB) monetary policy announcement tomorrow.
The euro initially advanced following data that showed that the mood among investors in Germany was improving. The German ZEW sentiment index jumped to 26.7 in December, up from 10.7 in the previous month. The improved mood was largely owing to the phase one trade deal agreed between the US and China in December and signed by the two powers last week. The agreement has put an end to 18 months of wrangling between US and China, which had weighed on global confidence and demand, negatively impacting exporter nation Germany.
Today investors will be looking ahead to the ECB monetary policy announcement. This will be the second meeting with Christine Lagard at the helm. With interest rates already very low and inflation ticking higher to 1.3%, the central bank is not expected to adjust monetary policy. It is expected to continue with a dovish bias.
Perhaps of more interest to investors, the ECB are expected to kick off a strategic review. Within this broad review one of the most important parts will be the ECB looking to better define their target and how to measure it. This could mean a shift inflation target or at least a more flexible target range.
Coronavirus, Impeachment & Housing Data
The safe haven dollar strengthened in the latter part of the trading day on Tuesday as risk off dominated amid growing concerns over the spread of coronavirus from China across the globe. The first case of the virus, which has already claimed 6 lives has been identified in US. Markets fear a repeat of the SARS virus 17 years ago.
US President Trump’s impeachment trial also began yesterday. The trial, the spread of coronavirus and some mid-tier housing data will drive the dollar today.
|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.