EUR/USD – Euro ticks higher, U.S consumer inflation reports next

EUR/USD has recorded slight gains in the Wednesday session. Currently, the pair is trading at 1.1330, up 0.10% on the day. On the release front, Eurozone industrial production rebounded in October with a gain of 0.2%, after a decline of 0.3% a month earlier. This matched the forecast. In the U.S, the focus is on inflation indicators. CPI and Core CPI are expected to drop, with estimates of 0.0% and 0.2%, respectively. On Thursday, Germany releases Final CPI and the ECB will set its interest rate. The U.S will publish unemployment claims.

After three years of stimulus, the ECB is expected to finally wind up the bank’s bond purchase program at the Thursday policy meeting. Through the program, the ECB purchased some 2.5 trillion euros in assets. The program was implemented in order to kick-start the economy and raise ultra-low inflation levels. Inflation has moved closer to the ECB target of around 2 percent, and the eurozone economy performed well earlier in the year. This prompted the ECB to announce that it would wind up the program in December. However, economic conditions have deteriorated in recent months, as the nagging U.S.-China trade war has weighed on the global economy and hurt the export and manufacturing sectors in Germany and the eurozone. ECB policymakers are not expected to change course, but any hints of re-introducing stimulus in 2019 would likely send the euro sharply lower.

When it comes to monetary policy, things can change very quickly. Only a few months ago, the booming U.S. economy led to speculation that the Federal Reserve would continue raising rates in 2019, possibly up to four times. Since then, signs of a slowdown in the economy have caused the Fed to reassess its “gradual rate hike” policy, and many analysts are predicting just one rate hike next year. Three rate hikes so far this year have slowed economic growth, as seen by lower GDP readings and a dismal nonfarm payrolls report for November. Still, the Fed is widely expected to raise rates at the policy meeting on December 19, with the CME setting the odds of a hike at 80 percent.

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EUR/USD Fundamentals

Wednesday (December 12)

• 4:00 Italian Quarterly Unemployment Rate. Estimate 10.3%. Actual 10.2%
• 5:00 Eurozone Industrial Production. Estimate 0.2%. Actual 0.2%
• 8:30 US CPI. Estimate 0.0%
• 8:30 US Core PPI. Estimate 0.2%
• 10:30 US Crude Oil Inventories. Estimate -3.0M
• 13:01 US 10-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate -193.5B

Thursday (December 13)

• 2:00 German Final CPI. Estimate 0.1%
• 7:45 Eurozone Main Refinancing Rate. Estimate 0.00%
• 8:30 ECB Press Conference
• 8:30 US Unemployment Claims. Estimate 226K

*All release times are EST

*Key events are in bold

EUR/USD for Wednesday, December 12, 2018

EUR/USD for December 12 at 6:45 EST

Open: 1.1319 High: 1.1338 Low: 1.1315 Close: 1.1330

EUR/USD Technical

EUR/USD was flat in the Asian session and has posted slight gains in European trade

• 1.1300 is providing support
• 1.1434 is the next resistance line
• 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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