News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • AUD/NZD, Could This be the Turnaround? - #AUDNZD chart on @TradingView https://t.co/Hl6VSfO5R8
  • Another pleasure being on @ausbiztv with host @AusAndrewG talking about US indices, rising bond yields and $USDJPY Check out the full interview here! - https://t.co/GWWCZ7t9Tf https://t.co/WmqUvCMvpZ
  • 🇦🇺 Retail Sales MoM Prel (AUG) Actual: -1.7% Previous: -2.7% https://www.dailyfx.com/economic-calendar#2021-09-28
  • 🇨🇳 Industrial Profits (YTD) YoY (AUG) Actual: 49.5% Previous: 57.3% https://www.dailyfx.com/economic-calendar#2021-09-28
  • (APAC Stocks Briefing) Dow Jones Gains as Nasdaq 100 Sinks, Crude Oil Boosts Energy Stocks. ASX 200 in Focus #DowJones #CrudeOil #NASDAQ #ASX200 https://www.dailyfx.com/forex/market_alert/2021/09/28/Dow-Jones-Gains-as-Nasdaq-100-Sinks-Crude-Oil-Boosts-Energy-Stocks-ASX-200-in-Focus.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/yTN6C2IOvV
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjLdTSk https://t.co/kbV2qS0Mph
  • Heads Up:🇨🇳 Industrial Profits (YTD) YoY (AUG) due at 01:30 GMT (15min) Previous: 57.3% https://www.dailyfx.com/economic-calendar#2021-09-28
  • Heads Up:🇦🇺 Retail Sales MoM Prel (AUG) due at 01:30 GMT (15min) Previous: -2.7% https://www.dailyfx.com/economic-calendar#2021-09-28
  • Join @FxWestwater at 22:00 EST/2:00 GMT for a webinar on preparing to trade commodities markets in the week ahead. Register here: https://t.co/qTOa61aMmN https://t.co/0215tACld8
  • Did you know a Doji candlestick signals market indecision and the potential for a change in direction. What are the top five types of Doji candlesticks? Find out https://t.co/c51s3IBcEu https://t.co/Dq7umm2uyz
Forex: Euro Struggles On Deepening Recession- ECB Rate Cut On Horizon

Forex: Euro Struggles On Deepening Recession- ECB Rate Cut On Horizon

David Song, Strategist

Talking Points

  • Euro: 3Q Employment Falters, Core Inflation Falls Short Of Expectations
  • British Pound: U.K. Core Inflation To Tick Higher, All Eyes On BoE Minutes
  • U.S. Dollar: Index Pares Losses As Risk Appetite Subsides, CPI Misses Forecast

Euro: 3Q Employment Falters, Core Inflation Falls Short Of Expectations

The EURUSD pared the overnight advance to 1.3118 as employment in the euro-area contracted 0.2% in the third-quarter, and the ongoing weakness in the labor market may produce a prolonged recession in Europe as the jobless rate is expected to hit fresh record-highs in 2013.

Although the headline reading for euro-area inflation held steady at 2.2% in November, the core reading for consumer prices increased 1.4% during the same period to mark the slowest pace of growth since August 2011, and easing price pressures certainly raises the scope for another rate cut from the European Central Bank (ECB)as the economic downturn threatens price stability.

As the ECB preserves a dovish tone for monetary policy, we should see the Governing Council carry its easing cycle into the following year, and the Governing Council looks poised to push the benchmark interest rate to a fresh record-low in an effort to stem the downside risks for growth and inflation.

As the EURUSD continues to carve a lower top around the 38.2% Fibonacci retracement from the 2009 high to the 2010 low (1.3120), we may see a short-term reversal take shape in the week ahead, and we will look for a move back towards the 23.6% retracement around 1.2640-50 as the fundamental outlook for the euro-area remains bleak.

British Pound: U.K. Core Inflation To Tick Higher, All Eyes On BoE Minutes

The British Pound fell back from 1.6142 to trade within the previous day’s range, and the sterling appears to be coiling up for a move higher as the economic docket for the following week is expected to dampen bets for more monetary support.

Although the headline reading for U.K. inflation is expected to hold steady at 2.7%, we’re anticipating a small uptick in the core CPI, and sticky price growth may prop up the sterling ahead of the Bank of England (BoE) Minutes due out on December 19 as the central bank drops its dovish tone for monetary policy.

Indeed, the policy statement may reveal a shift in policy outlook as the BoE looks to address the threat for inflation, and we should see the Monetary Policy Committee (MPC) slowly move away from its easing cycle as price growth is expected to hold above the 2% target over the next two-years. In turn, we should see the MPC endorse a wait-and-see approach in 2013, and a growing number of BoE officials may start to draw up a tentative exit strategy in the year ahead in an effort to balance the risks surrounding the U.K. economy.

As the relative strength index on the GBPUPSD preserves the upward trend from November, we continue to look for another test of the 23.6% Fib from the 2009 low to high around 1.6200, and we may see the British Pound outperform in 2013 as the BoE appears to be bringing its easing cycle to an end.

U.S. Dollar: Index Pares Losses As Risk Appetite Subsides, CPI Misses Forecast

The greenback appears to be regaining its footing going into the North American trade, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) bouncing back from a low 9,951, and the reserve currency may track higher throughout the remainder of the day as the rebound in risk sentiment appears to be tapering off.

Nevertheless, we saw U.S. consumer prices slow for the first time since May, led by lower energy costs, and easing price pressures dampens the appeal of the greenback as it increases the Fed’s scope to expand its balance sheet further. As the central bank maintains a highly accommodative policy stance, speculation for more easing will continue to drag on the exchange rate, but we may6 see the 2013 Federal Open Market Committee (FOMC) scale back their dovish tone amid the more broad-based recovery in the world’s largest economy.

FX Upcoming

Currency

GMT

EDT

Release

Expected

Prior

USD

14:15

9:15

Industrial Production (NOV)

0.2%

-0.4%

USD

14:15

9:15

Capacity Utilization (NOV)

78.0%

77.8%

USD

14:15

9:15

Manufacturing Production (SIC) (NOV)

-0.9%

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

Related Articles: Weekly Currency Trading Forecast

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES