eur fundamentals

Euro Remains Heavy, But 1.25 is the Level to Watch Ahead of Thursday'€™s European Central Bank (ECB) Rate Cut

Monday, 01 December 2008 22:35:06 GMT  |  Terri Belkas, Currency Strategist

The euro ended Monday consolidating above support at 1.26, but 1.25 - where there is intraday rising trendline support – provides a more significant level that will be worth watching, as a break below may be followed by a test of the October lows of 1.2328.

Looking ahead, the Euro-zone's producer price index for the month of October is forecasted to fall negative for the third consecutive period at a rate of -0.3 percent, while the annual rate is anticipated to cool to 7.0 percent from 7.9 percent. Weaker commodity prices have helped to drive input costs lower, and when you take into account falling demand in the Euro-zone and abroad, producers are finding themselves with little in the way of pricing power. A decline in PPI in line with or more than expectations will only add to speculation that the European Central Bank will cut rates by at least 50 basis points on Thursday to a more than 2-year low of 2.75 percent, especially as last week's Euro-zone CPI estimates showed inflation falling back towards the ECB's 2.0 percent target.

Related Article: Euro, British Pound Not the Only Currencies Facing Major Central Bank Decisions This Week

Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.

Resources

• free demo account
• forex courses
• open an account
• forex stream
• free webinars