EUR/USD continues to have a quiet week. Currently, EUR/USD is trading at 1.2125, up 0.13% on the day.
Eurozone numbers show recovery
Are we seeing an economic recovery in the eurozone? Tuesday’s data was strong across the bloc, although the euro barely lifted an eyebrow. Eurozone Revised GDP rebounded in the third quarter, with a gain of 12.5%, revised downwards from the initial reading of 12.6%. This follows two straight declines, including a drop of 11.8% in the second quarter. There was more positive news as, Employment Change came in at 1.0% in Q3, after a reading -2.9% beforehand.
Germany and France, the number one and two economies in the bloc, also showed numbers indicating improvement. German ZEW Economic Sentiment jumped to 55.0 in December, from 39.0 a month earlier. This pointed to a move into expansionary territory. The eurozone indicator followed the same trend, climbing from 32.8 to 54.4 points. France’s numbers have also been pointing upwards, and the country’s trade deficit narrowed to EUR 4.8 billion in October, from EUR 5.7 billion a month earlier. This marked the lowest trade deficit since March.
The euro has taken a pause from its upswing, after climbing 1.3% last week against the limping US dollar. EUR/USD climbed as high as 1.2177 last week, its highest level since April 2018. There are two events which could have bearing on the fortunes of the euro this week. The ECB meets for its monthly policy meeting on Thursday, with policymakers expected to implement further easing by expanding the Pandemic Emergency Purchase Programme (PEPP). Under the PEPP, the ECB has pledged to by EUR 1.35 trillion in assets, and is expected to raise this amount by another EU 500 billion, to EUR1.85 trillion. As well the ECB could extend the PEPP for another six months, to the end of 2021.
The other event which could affect the direction of the euro is the Brexit talks. British Prime Minister Johnson has flown to Brussels in a last-ditch effort to rescue the negotiations, which appear to have hit an impasse with the deadline of December 31st fast approaching. For months, the markets have priced in a Brexit agreement being reached, so failure to close the deal could see a negative reaction from the euro.
- EUR/USD has tested resistance at 1.2162. Above, the next resistance line is at 1.2203
- EUR/USD tested support at 1.2095 in the Asian session, followed by a support line at 1.2069
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