GBP/EUR: Euro Falls Ahead of ECB Decision
  • Euro (EUR) picks up after weak start despite dovish ECB comments
  • German CPI -0.2% YoY as expected
  • US Dollar (USD) trades broadly firmer as covid fears overshadow vaccine optimism
  • US jobless claims in focus

The Euro US Dollar (EUR/USD) exchange rate is edging higher on Thursday paring some losses from the previous session. The pair settled lower on Wednesday -0.3% at US$1.1777 well off the high of US$1.1810. At 08:15 EUR/USD trades +0.1% at US$1.1790.

The Euro came under pressure in the previous session after European Central Bank President Christine Lagarde dampened the mood, warning over further virus transmission and more widespread lockdowns. She also hinted at exchange rate concerns, mentioning that a stronger Euro could hurt the recovery in inflation. Inflation in the region is very weak.

Today, the Euro started on the back foot before showing resilience despite inflation data from Germany, as measured by the consumer price index falling in October and confirming the preliminary reading. CPI year on year declined by -0.2%. This is the third time this year that the annual CPI has dipped into negative territory.

The Euro is holding on to gains even though the broader mood in the market is more downbeat on Thursday, as covid cases across Europe rise and Italy moves closer to a national lockdown.

Industrial production data is due shortly. Analysts are expecting a 0.7% increase month on month in September.

The US Dollar is holding broadly firm versus its major peers as concerns over surging covid cases grow, overshadowing Pfizer’s vaccine breakthrough news at the start of the week. New daily cases in the US hit 130,000 which is raising questions over whether the US will see another lockdown.

Looking ahead US jobless claims are in focus later today. Aanalysts are expecting the number of Americans who signed up to unemployment benefits to be 735,000, down slightly from the previous weeks’ 751,000. The data would be consistent with a very slow improvement in the labour market as the economy waits for additional stimulus to be agreed by Congress.