GBP/EUR: Euro vs Pound Awaits ECB Address At End Of QE
  • Euro (EUR) eases off 2.5 year high as risk sentiment falters
  • German retail sales jump 2.6% MoM in October
  • US Dollar (USD) pushes higher on risk flows after Biden’s China comments
  • US ADP private payrolls in focus

The Euro US Dollar (EUR/USD) exchange rate is heading lower on Wednesday after a stellar session on Tuesday. The pair surged +1.2% on Tuesday in the largest one day rally since March, settling at US1.2070 at the high of the day. At 09:15 UTC, EUR/USD trades -0.17% lower at US$1.2048.

After starting the European session off on the front foot the Euro has reversed lower as risk sentiment eased. Not even strong German retail sales were able to keep the Euro trading at 2.5 year highs.

Retail sales jumped a forecast beating 2.6% month on month after an upwardly revised drop of -1.9% in September. The surge in sales came ahead of Germany’s November partial national lockdown and following solid manufacturing PMI data in the previous session. Retail sales are a notoriously volatile indicator so a strong reading by no means points to a strong new trend.

Looking ahead Eurozone unemployment data will be in focus. Analysts are expecting just a small tick higher to 8.3%, in October, up from 8.2% in September.

The risk off mood came following comments from US President elect Joe Biden over his stance with China. Joe Biden said that he would not immediately undo the Phase 1 trade agreement with China. These comments shed some light on the approach that Biden could have with Beijing and it appears that relations will take longer to normalise than initially thought.

US fiscal stimulus is also back under the spotlight after Majority leader Mitch McConnell rejected a new $908 billion fiscal stimulus proposal, put forward by a bipartisan group of lawmakers.

Looking ahead attention will be on US ADP private payroll data which is due to be released in the US session. Expectations are for 475,000 private jobs added in November compared to 365,000 added in October. A strong number would bode well for Friday’s non-farm payroll report.