- Euro (EUR) rallies on upbeat market mood
- Eurozone CPI data in focus
- US Dollar (USD) declines as Fed remains committed to supporting the economy
- US initial jobless claims are expected to remain elevated
The Euro US (EUR/USD) Dollar exchange rate is bounding higher on Thursday, extending gains for a fourth straight session. The pair settled +0.4% on Thursday at US$1.2198 just 17 pips off the high of the day. At 09:15 UTC, EUR/USD trades +0.3% at US$1.2230 towards the high of the day and the year US$1.2244.
The Euro hit a fresh year to date high thanks to US Dollar weakness and better than expected data for the region.
Eurozone PMIs on Wednesday showed that the economic performance of the bloc exceeded expectations in December despite a renewed lockdown restriction in several countries.
The composite PMI which is a good gauge of economic health increased to 49.8 in December, up from 45.3 last month. The level 50 separates expansion from contraction.
Looking ahead Eurozone inflation, as measured by the consumer price index will be in focus. Expectations are for disinflation of -0.3% to be confirmed
The US Dollar found some support in the previous session following dismal retail sales. Sales declined in November by the most in 7 months, highlighting the faltering economic recovery amid a resurgence of covid cases and tighter restrictions to stem the spread of the virus. Retail sales fell 1.1%.
The US Dollar then dropped sharply after the US Federal Reserve, as expected kept monetary policy unchanged and remained cautious. The accompanying statement was also barely unchanged. Even with the prospect of a fiscal stimulus package and a vaccine roll out programme next year, the Fed continue to suggest that there is little chance of higher interest rates before 2024.
Looking ahead, attention will now turn to jobless claims data due in the US session. Last week’s initial jobless claims unexpectedly jumped to a 3 month high reflecting the impact of the latest covid restrictions on the labour market. Analysts forecast claims increased 800,000, down from last week’s 583,000.