EURUSD Movement
For the 24 hours to 23:00 GMT, the EUR declined 0.94% against the USD and closed at 1.0632, after the Euro-zone’s seasonally adjusted industrial production unexpectedly declined 0.1% on a monthly basis in October, falling for the second consecutive month and confounding market expectations for an advance of 0.1%. Industrial production recorded a revised drop of 0.9% in the prior month.
The US Dollar surged against a basket of major currencies, after the US Federal Reserve (Fed) raised interest rates for the first time this year and signalled a faster pace of increases in 2017.
The US Fed, in its last monetary policy meeting of the year, increased interest rates by a quarter point to between 0.50% and 0.75%, at par with market expectations, saying the American economy is expanding at a healthy pace. In a post-meeting statement, the central bank stated that inflation expectations have increased “considerably” and labour market is tightening, allowing the central bank to raise interest rates further next year. In its summary of projections, the Fed expects three rate hikes in 2017, up from the two seen in the previous forecasts in September and maintained their projection of three hikes each in 2018 and 2019. Further, the bank also revised its economic growth forecasts to 1.9% in 2016, from an earlier projection of 1.8% and by 2.1% in 2017, from 2.0%.
Another set of economic data revealed that advance retail sales rose less-than-expected by 0.1% in November, posting its smallest gain in 3 months, compared to market expectations for a rise of 0.3% and after recording a revised gain of 0.6% in the previous month. On the other hand, the nation’s industrial production eased more-than-anticipated by 0.4% MoM in November, declining by the most in 8 months, compared to a revised advance of 0.1% in the prior month, while markets were expecting industrial production to drop 0.3%. Moreover, the nation’s manufacturing production fell 0.1% on a monthly basis in November, lower than market expectations for a drop of 0.2% and after registering a revised rise of 0.3% in the previous month. Also, business inventories dropped to an eleven month low, after it fell 0.2% in October, surpassing investor consensus for a fall of 0.1%. In the prior month, business inventories had recorded a revised flat reading. Additionally, the nation’s mortgage applications fell 4.0% in the week ended 09 December 2016. In the previous week, mortgage applications had dropped 0.7%.
In the Asian session, at GMT0400, the pair is trading at 1.0510, with the EUR trading 0.21% lower against the USD from yesterday’s close.
The pair is expected to find support at 1.0428, and a fall through could take it to the next support level of 1.0347. The pair is expected to find its first resistance at 1.0630, and a rise through could take it to the next resistance level of 1.0751.
Moving ahead, investors will look forward to the flash Markit manufacturing and services PMI, both for December, across the Euro-zone, slated to release in a few hours. Moreover, in the US, consumer price index for November, flash Markit manufacturing PMI and NAHB housing market index for December, all slated to release later in the day, would garner a lot of market attention.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
