Euro slips below 1.13 but recovers

The euro lost ground earlier on Thursday but has recovered most of these losses. EUR/USD is currently trading at 1.1337, down 0.08% on the day.

Risk appetite boosts euro

With a very light economic calendar this week, the markets are being driven by sentiment, which essentially means the latest Omicron headlines. The markets remain fairly upbeat, despite the explosion in Omicron infections. France and the US posted all-time record highs for the number of new cases, but that hasn’t made a dint in investor sentiment. The equity markets are humming, with the S&P 500 and Dow Jones posting record highs, while the safe-haven dollar is broadly lower as risk tolerance remains elevated. This upbeat mood was reinforced by a larger than expected decline in US crude oil inventories and an unemployment claims release of 198 thousand, which was better than expected. This suggests that the US economy continues to perform well, even with the newest Covid wave.

ECB President Christine Lagarde has been rather dismissive of inflationary pressures, even with eurozone inflation hitting a record 4.9% y/y in November. The ECB this month projected that inflation will fall to 1.8% after 2022, but this view is by no means unanimous. In an interview published on Thursday, ECB member Klaas Knot said that eurozone CPI could well remain above the bank’s 2% target for years and that the bank’s forecast “could prove to be too rosy”. The ECB has no plans to change its accommodative policy, and plans to continue QE even while winding up its emergency pandemic programme (PEPP) in March 2022.

Spain’s Flash CPI for December is estimated at 6.7%, much higher than the 5.5% gain in November. If eurozone CPI releases in early January also show an uptick, we could see additional ECB members echo Knot’s view that inflation could stay above the bank’s 2% target in the coming years.

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 EUR/USD Technical

  • EUR/USD has support at 1.1255. Below, there is support at 1.1190
  • There is resistance at 1.1364 and 1.1408

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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