EURUSD Movement
For the 24 hours to 23:00 GMT, EUR rose 0.12% against the USD and closed at 1.3616.
Yesterday, official data confirmed that the inflation in the Euro-zone slowed in December, in-line with analysts’ expectations. According to a report by Eurostat, the consumer price inflation in the region rose 0.8% in December, on an annual basis, in line with preliminary estimates, however lower than a rate of 0.9% recorded in the preceding month. Furthermore, the German CPI rose 1.4% (YoY) in December, in line with the preliminary estimate and following a 1.3% rise recorded in previous month.
Meanwhile, in its monthly bulletin released yesterday, the ECB reiterated that interest rates in the region would be maintained at current or lower levels for as long as necessary. The report further emphasized that medium to long term inflation expectations in the Euro-zone remained subdued and that the region could face prolonged period of low inflation before a gradual pickup.
Additionally, the Eurogroup President, Jeroen Dijsselbloem urged that the current low level of consumer prices is not a major threat to economic recovery and it was the unlikely that prices would decelerate further. Meanwhile, ECB Governing Council member, Jens Weidmann dismissed fears of the region falling into deflation and added that the record-low interest rates could provide positive economic impetus to Germany and the Euro-zone. However, the ECB Policymaker, Benoit Coeure indicated yesterday that the central bank would take measures and slash its main interest rate further if inflation expectations continued to move away from its target.
In the US, the Labour Department revealed that the CPI rose 1.5%, on an annual basis, after recording a rise of 1.2% in the previous month. Meanwhile, the number of Americans filing new claims for unemployment fell to 326,000 in the week ending January 10, 2013, the lowest in six weeks from the prior week’s revised figure of 328,000. Furthermore, the National Association of Home Builders (NAHB) / Wells Fargo reported that the housing market index in the US eased to a reading of 56.0 in January, against the market expectations for a level of 58.0 and from a level of 57.0 reported in the previous month. Separately, the Fed Philadelphia reported that diffusion index of current activity in the US rose to a level of 9.4 in December, higher than market expectations of a level of 8.8 and compared to a reading of 6.4 reported in the previous month.
Yesterday, the outgoing Federal Reserve Chairman, Ben Bernanke downplayed concerns that the central bank’s huge asset-purchases programme is proving to be an obstacle to growth in the economy. He further added that the quantitative easing (QE) has been helpful and effective to some extent and showed no immediate sign of creating a bubble in asset prices.
The San Francisco Fed President, John Williams also talked about QE and stated that it is “blunt tool” that works, however a lot of uncertainty does exist. He further criticized the forward guidance policy adopted by the Fed last year, describing it as “overly simplified and prone to misinterpretation.”
In the Asian session, at GMT0400, the pair is trading at 1.3615, with the EUR trading tad lower from yesterday’s close.
The pair is expected to find support at 1.3582, and a fall through could take it to the next support level of 1.3549. The pair is expected to find its first resistance at 1.3649, and a rise through could take it to the next resistance level of 1.3683.
With a relatively light economic calendar in the Euro-zone, trading trends would be determined by releases from the US. Also, investors would pay close attention to the German Federal Constitutional court ruling later today regarding the constitutionality of the ECB’s Outright Monetary Transactions policy (OMT).
The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.
