EUR/USD drops on tariff delay talk, stronger US inflation
Fiona Cincotta August 13, 2019 10:35 AM
The euro remained resilient across the early European session, despite mounting evidence that the German economy is heading towards a recession. German ZEW sentiment data dived to -44.1, the worst level in seven years and an exorbitant miss, versus expectations of -28.5 and a previous print of -24.5. The figures point to a serious and significant deterioration in the outlook for the German economy; toxic cocktail of the recent escalation in US – Sino trade tensions, the increased likelihood of a no deal Brexit adding to already soft economic growth.Investors will now look ahead to German GDP data due for release tomorrow. The expectation is that the German economy contracted. However, with uncertainty from the US – Sino trade war expected to continue hitting demand for German exports, Europe’s largest economy could well be heading for a recession.
The dollar rose moderately following the release of US inflation data. CPI increased to 1.8% yoy ahead of the 1.7% forecast. Core CPI, which excludes more volatile items such as food and fuel unexpectedly ticked higher to 2.2% yoy, ahead of the 2.1% forecast. However, the dollar strengthened considerably on the announcement that the US could delay tariffs on some Chinese imports until December. With little in the way of positive news surrounding the US – Sino trade dispute recently, investors were quick to react, pushing the dollar higher.
Geopolitical concerns, (Hong Kong and China) in addition to ongoing trade concerns, and the impact on global growth, has been a central focus for dollar traders. Recession fears have been growing recently. An easing of trade tensions is a positive for the US economy. This, plus an unexpected tick higher in inflation is proving to be supportive of the greenback.
EUR/USD levels to watch:
The EUR/USD is trading a range between $1.1250 and $1.1160 and is showing a reluctance to breakout. A move below $1.1160 could open the door to $1.1100 prior to $1.1025. On the upside, a break through resistance at $1.220 could see the pair move higher with more conviction to $1.1250, prior to $1.1280.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.