Yesterday (23/11), EUR/USD was fairly strong before returning closing at $1.06346, almost unchanged from the opening price of $1.06341.
In early trading, the euro was supported go up after the positive signals from the European economy. Markit research group yesterday announced a series of data including PMI (purchasing power measured by the administrator) manufacturing sector and the service of France, Germany and the entire euro zone area. The report shows only two aggregate PMI manufacturing sector and services (composite PMI) of the Euro zone area, rose from 53.9 in October to 54.4 in November, the highest level recorded in over 4 years. Besides, two PMI manufacturing and services in Germany reached 52.6 and 55.6 respectively in November, better than the figure in October 52.1 and 54.5.
However, it should be made clear that this data does not include results from the attack of the French capital, Paris. And just over a week left until the meeting of the European Central Bank (ECB), while ECB officials, especially ECB president, has enhanced loosening point quite clear. Speaking in Frankfurt on 20/11, Mr. Mario Draghi said inflation common currency area was too low, reaching only 0.1% compared to the 2% target. Therefore, the ECB “will do what forced to increase inflation as quickly as possible”, ie expanding the program to buy local bonds, asset purchases or lower interest rates,etc. in order to promote European economy.
Thus, in the long term, the euro remained under pressure from the prospect of easing monetary policy of the ECB, that the currency risk being dragged down deep anymore.
Yesterday in the US, the data on housing and manufacturing PMI was also published. While home sales is only 5.36 million units, down 3.4% compared with September of 5:55 million units, and the lower figure is 5.4 million units forecast, the manufacturing PMI also stop at 52.6 , did not achieve the expected level of 54.0. However, if we look at home sales in September, may see this figure had soared to the second highest level since 2007, therefore, the reduction of 3.4% in October as no surprise to the market . Additionally, the stronger dollar makes US commodities demand diminished and affect production operations is what is foreseen. Therefore, the dollar still flourishes.
In addition, the dollar rebounded cause yesterday was due to an extraordinary meeting of the US Federal Reserve (Fed) on the possibility of raising the discount rate (the interest rate that the Fed’s branches for banks commercial loans). Fed discount rate hike will make the borrowing costs of commercial banks more expensive, thereby reducing the amount of money supply in the market. Up to now, bets the Fed raised interest rates at its meeting on 15-16 / 12 has increased 74%, consolidating its position in USD buying pressure and pull the pair down.
In the letter answering criticism last month by Ralph Nader (the renowned lawyer specializing in consumer protection), Fed Chairman Janet Yellen defended the interest rate policies of central banks and highlighting tightening route will be carried out gradually. Minutes of the Fed’s October meeting released on the 4th (18/11) showed that most of the members of the Open Market Committee Federal believe that December is the right time to raise interest rates. Spokesman her yesterday reinforces market expectations, continued downward pressure for the Euro price.
Today, the focus of the market is the US GDP data released preliminary third quarter, the index of consumer confidence, the price index of personal consumption (PCE) and core PCE, the two indices are used as size Inflation measured by the Fed. Analysts assess preliminary third-quarter GDP will reach 2.0%, higher than the GDP data preamble (Advance GDP) was 1.5%. Besides, the consumer confidence index is expected to rise to 99.3 points, higher than the previous month at 97.6 points. The economic figures achieved as expected will strengthen the Fed raised interest rates, and pulled gold prices down further.
Currently, at 2:25 pm GMT+7, EUR/USD was trading at $1.06403, up slightly from the opening price $1.06345.
Forecast: In the long term, the Euro remains under pressure from the monetary policy of the Fed and ECB polarization. While the ECB is expected to strengthen the easing in its meeting on 3/12, the prospect of Fed tightening economic increasingly clear. Prediction pair capable of breaking down the threshold $1.05600.
However, a stronger dollar and lower energy prices likely cause of US PCE index gained 1.3% not as expected. Pressure weighing on the route of the Fed raising interest rates may bring the pair rebounded to $1.06800.