It’s been a quiet start to the week on the fundamental release front, and the euro has followed suit with little movement so far this week. In Wednesday’s European session, EUR/USD is trading slightly above the 1.37 line. In economic news, Wednesday has more to offer the markets. Eurozone Current Account slipped to a six-month low, and the markets are not expecting much change from Eurozone Consumer Confidence, which has looked weak. In the US, the Federal Reserve releases its policy meeting minutes, and Fed chair Janet Yellen speaks at a university commencement in New York.
Eurozone indicators continue to struggle this week. The current account surplus dropped to EUR 18.8 billion, well short of the estimate of EUR 24.2 billion. This marked the lowest surplus we’ve seen since October. The news wasn’t any better from the inflation front, as German PPI posted its third decline in four tries. The index came in at -0.1%, short of the estimate of 0.0%. The ECB has tried to downplay concerns over lack of inflation, but when Mario Drahgi acknowledged earlier in May that the central bank could take action in June, depending on inflation and growth projections, the euro responded with sharp losses.
The Federal Reserve will be in the spotlight on Wednesday, with the release of the minutes of the most recent policy meeting. The Fed has been trimming its asset purchase program since December, and is expected to wind up the program before the end of 2014, provided that the economy does not take a downward spin. Since 2008, the benchmark interest rate has been close to zero, and no increases are expected before mid-2015. The pace of future increases will likely be slow, to allow for a smooth adjustment from the economy and the financial markets.
After climbing close to the key 1.40 level, the euro slumped and headed for the hills after ECB president Mario Draghi stated he was prepared to take action in June to tackle low growth and weak inflation . The markets have heard tough talk (and no action) from Draghi before, but there is a feeling in the air that the June ECB meeting could be different. There is speculation that the ECB could cut the benchmark rate, which is currently at just 0.25%, or lower deposit rates, which are at 0%, into negative territory. As we get closer to the June meeting, we can expect some volatility from EUR/USD.
EUR/USD for Wednesday, May 21, 2014
EUR/USD May 21 at 8:55 GMT
EUR/USD 1.3716 H: 1.3723 L: 1.3711
- EUR/USD has inched upwards in Wednesday trade.
- 1.3649 is providing support. 1.3585 is stronger.
- 1.3786 is the next resistance line.
Further levels in both directions:
- Below: 1.3649, 1.3585, 1.3487 and 1.3346
- Above: 1.3786, 1.3893, 1.4000, 1.4149
OANDA’s Open Positions Ratio
EUR/USD ratio is unchanged in Wednesday trading. This is consistent with the movement we are seeing from the pair, as the euro is listless. The ratio runs slightly in favor of long positions, indicative of a slight trader bias towards the euro breaking out and moving higher.
EUR/USD is trading quietly above the 1.37 on Wednesday. The pair is unchanged in the European session.
- 8:00 Eurozone Current Account. Estimate 24.2B. Actual 18.8B.
- Tentative – German 10-year Bond Auction.
- 14:00 Eurozone Consumer Confidence. Estimate -8 points.
- 14:00 US FOMC Member William Dudley Speaks.
- 14:30 US Crude Oil Inventories. Estimate -0.1M.
- 15:30 US Federal Reserve Chair Janet Yellen Speaks.
- 17:30 US FOMC Member Narayana Kocherlakota Speaks.
- 18:00 US FOMC Meeting Minutes.
*Key releases are highlighted in bold
*All release times are GMT