EUR/USD – Euro shrugs off soft German retail sales

EUR/USD has ticked lower in the Friday session, after posting slight losses on Thursday. Currently, the pair is trading at 1.1378, down 0.13% on the day. On the release front, German retail sales fell to a 3-month low, with a reading of -0.3%. This was well off the estimate of 0.4%. In the eurozone, CPI is expected to edge lower to 2.1% and the unemployment rate is forecast to dip to 8.0%. In the U.S., Chicago PMI is expected to edge up to 58.6 points. As well, the G-20 begins a 2-day summit in Argentina.

German numbers have been sagging, and there was more grim news on Friday, as retail sales posted its first decline since July. Consumers are holding tighter to the purse strings, which is hurting economic growth. Unsurprisingly, consumer confidence softened in November – the reading of 10.4 points was its lowest level since May 2017.

The ongoing U.S-China trade war has dampened the German export sector, as German companies that export to both the U.S. and China are now facing higher tariffs. Germany’s economy posted a rare decline in the third quarter, with a contraction of 0.2%. Another problem is lower eurozone growth, as weak economic activity in the third quarter appears to have continued into in the fourth quarter. As well, the looming departure of Britain from the European Union and the crisis over the Italian budget have weighed on business and consumer confidence levels in Germany.

Surprise! Federal Reserve Chair Jerome Powell caught the markets off guard on Wednesday. Powell was unexpectedly dovish in his remarks at an event in New York, saying that the current benchmark rate of 2-2.5 percent is “just below” the neutral range. This is in sharp contrast to Powell’s remarks just last month, when he said that rates were “a long way from neutral”. The obvious U-turn is likely due to the change in economic conditions in recent weeks – GDP has been slowing, the stock markets are down and oil prices have fallen. The Fed may have decided that this required an easing up on rate hikes in 2019, and Powell delivered this message to the markets. Just a few weeks ago, there was talk of up to four rate hikes in 2019, but this could be scaled back to just one or two rate increases. Despite Powell’s new dovish stance, the odds of a hike in December have actually increased this week, with the CME pegging the odds at 82%.

China’s manufacturing PMI lowest in almost 2-1/2 years

Lingering uncertainties

EUR/USD Fundamentals

Friday (November 30)

• Day 1 – G-20 Meetings
• 2:00 German Import Prices. Estimate 0.4%. Actual 1.0%
• 2:00 German Retail Sales. Estimate 0.4%. Actual -0.3%
• 2:45 French Preliminary CPI. Estimate -0.2%. Actual -0.2%
• 4:00 Italian Monthly Unemployment Rate. Estimate 10.1%
• 5:00 Eurozone CPI Flash Estimate. Estimate 2.1%
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.1%
• 5:00 Italian Preliminary CPI. Estimate -0.3%
• 5:00 Eurozone Unemployment Rate. Estimate 8.0%
• 9:00 US FOMC Member Williams Speaks
• 9:45 US Chicago PMI. Estimate 58.6

Saturday (December 1)

• Day 2 – G-20 Meetings

*All release times are EST

*Key events are in bold

EUR/USD for Friday, November 30, 2018

EUR/USD for November 30 at 3:50 EST

Open: 1.1393 High: 1.1401 Low: 1.1375 Close: 1.1378

EUR/USD Technical

EUR/USD was mostly flat in the Asian session and has ticked lower in European trade

• 1.1300 is providing support
• 1.1434 is the next line of resistance
• Current range: 1.1300 to 1.1434

Further levels in both directions:

• Below: 1.1300, 1.1212, 1.1120 and 1.0992
• Above: 1.1434, 1.1553 and 1.1685

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