- Euro (EUR) declines in risk off trade
- German consumer confidence beat forecasts
- US Dollar (USD) surges as yields jump
- US personal income & spending data in focus
The Euro US Dollar (EUR/USD) exchange rate trading lower after two straight days of gains. The pair settled +0.1% higher on Thursday at US$1.2176. At 09:15 UTC, EUR/USD trades -0.25% at US$1.214 after having picked up from a session low of US$1.2130.
The Euro trades on the back foot amid a souring market mood as fears over rising inflation, particularly in the US remain. Whilst Jerome Powell had managed to calm the markets earlier in the week, the impact of his soothing comments appear to be short lived.
The Euro managed to show resilience versus the US Dollar rebound in the previous session after German consumer confidence came in better than forecast heading towards March. Consumer morale in the Eurozone’s largest economy picked following the collapse caused by covid lockdown restrictions. Slowing infection rates and encouraging vaccine news is boosting the mood of German’s despite the ongoing lockdown conditions.
There is no high impacting Eurozone data leaving sentiment to drive the market.
The US Dollar shot higher on Thursday reversing losses from a 7 week low on upbeat data and rising inflation expectations.
US GDP for the fourth quarter was upwardly revised from 4% to 4.1% in the second reading. US durable goods orders also smashed expectations surging 3.5% month on month in January.
US jobless claims made it a hattrick of strong updates rising but 730,000 last week, significantly less than the 863,000 forecast and also the lowest level in 3 months.
The upbeat data added to the story that the US is expected to see a solid economic recovery amid the rapid rollout of the covid vaccine and the Biden administration’s $1.9 trillion covid stimulus package. As strong recovery is expected to bring higher inflation.
10 year treasury yields surged to a pre-pandemic high of 1.61% before easing back to 1.50% at the end of the day.
The bond markets will remain very much in focus on Friday. Additionally, investors could turn their attention to Personal income and spending data which should provide further clues over the health of the economic recovery.