The euro is broadly lower on Thursday, but has managed to hold its own against the US dollar. In the European session, the pair is trading in the low-1.35 range. In the US, we’ll be treated to the first major events of the week, with the release of Unemployment Claims, Core Retail Sales and Retail Sales. In the Eurozone, Industrial Production looked solid, posting a five-month high. Inflation indicators continue to struggle, as German WPI and French CPI missed their estimates.
The markets are keeping a close eye on Eurozone data following the ECB rate cuts last week. The central bank took action in an attempt to boost flagging growth and inflation levels. Industrial Production was a pleasant surprise, rising 0.8% in May, its best showing in 2014. This easily beat the estimate of 0.5%. However, the news was not reassuring on the inflation front, as data from major Eurozone members remains listless. German WPI came in at -0.1%, short of the estimate of +0.3%. French CPI recorded a flat reading of 0.0% for the second consecutive month.
There was more good news on the US employment front, as JOLTS Job Openings jumped to 4.46 million, up sharply from 4.01 million a month earlier. This easily beat the estimate of 4.04 million, and comes on the heels of a positive Nonfarm Payrolls last week. We’ll get a look at Unemployment Claims on Thursday, with the markets expecting a slight improvement compared to the previous release.
The euro remains under pressure as the markets continue to digest the interest cuts by the ECB last week. The ECB cut the benchmark rate to 0.15%, a record low, and became the first central bank to introduce negative deposit rates, a measure meant to encourage banks to increase their lending and combat the growing danger of deflation. At the same time, with the Federal Reserve continuing to trim its QE program, there is a strong likelihood that US rates will move upwards in 2015. Thus we have a situation where European and US yields are likely to move in opposite directions, and this has contributed to the euro’s troubles, as the currency has shed over a cent this week.
The ECB’s rate cuts last week were a belated (some would argue desperate) response to persistent weak growth and low inflation in the Eurozone, but the markets had expected tougher action. The cut in the benchmark rate was not as deep as anticipated, and many market players were looking for an asset purchase program, such as the schemes adopted by the Federal Reserve and Bank of England. It’s safe to say that the markets were underwhelmed by the ECB’s actions, with one analyst saying the ECB had fired a lot of small bullets rather than resorting to a bazooka. If growth and inflation numbers in the Eurozone continue to struggle, the ECB will be under pressure to take stronger action next month.
EUR/USD for Thursday, June 12, 2014
EUR/USD June 12 at 10:15 GMT
EUR/USD 1.3522 H: 1.3549 L: 1.3513
- EUR/USD is steady on Thursday.
- 1.3487 is providing support. 1.3346 is stronger.
- 1.3585 remains a weak resistance line. There is stronger resistance at 1.3649.
- Current range: 1.3487 to 1.3585
Further levels in both directions:
- Below: 1.3487, 1.3346, 1.3219 and 1.3102
- Above: 1.3585, 1.3649, 1.3786, 1.3893 and 1.4000
OANDA’s Open Positions Ratio
EUR/USD ratio is almost unchanged on Thursday. This is not consistent with the movement of the pair, as the euro has edged lower. The ratio has a majority of long positions, indicative of trader bias towards the euro improving against the dollar.
EUR/USD is showing little movement on Thursday. The pair is unchanged in the European session.
- 6:00 German WPI. Estimate 0.3%. Actual -0.1%.
- 6:45 French CPI. Estimate 0.1%. Actual 0.0%.
- 8:00 ECB Monthly Bulletin.
- 9:00 Eurozone Industrial Production. Estimate 0.5%.
- 12:30 US Core Retail Sales. Estimate 0.4%.
- 12:30 US Retail Sales. Estimate 0.5%.
- 12:30 US Unemployment Claims. Estimate 306K.
- 12:30 US Import Prices. Estimate 0.2%.
- 14:00 US Business Inventories. Estimate 0.4%.
- 14:30 US Natural Gas Storage. Estimate 111B.
- 17:01 US 30-year Bond Auction.
*Key releases are highlighted in bold
*All release times are GMT