Yesterday (29/10), the pair EUR/USD rose as the third quarter GDP figures were not as expected. Ending the session, the price closed at $ 1.09858, up 0.5% compared with the opening price $ 1.09258.
According to the US Department of Commerce, third-quarter GDP stands at 1.5%, compared with 3.9% in the second quarter. Economists predicted GDP would grow by 1.6%. Inventory levels of business in the third quarter reached 56.8 billion worth of dollars, the lowest number since the first quarter 2014 and down sharply from 113.5 billion dollars in the second quarter of this year, causing GDP decline sharply. As the Dollar goes down, the pair was supported to go up.
Consumer spending contributed 2/3 of the US economy. Spending in the second quarter and the third quarter rose 3.6% and 3.2%, respectively. Demand for domestic procurement, excluding trade, inventories and government spending is on the strong rise at 3.2%. Economists said the GDP slowdown was temporary, the economy remained healthy and was developing promising, which will enhance the ability to raise interest rates in December.
After meeting in October the Fed signaled directly to consider raising interest rates in December, the market will be monitoring economic data to assess the upcoming publication of the Fed statement on the economy, such as GDP quarter III adjusted, non-farm payrolls, the employment report, the inflation rate, speeches by Fed officials, …
With the outlook Fed raised interest rates in December, Goldman Sachs predict EUR/USD could reach $1.02 in the last quarter of 2015. If the number of positive US economic data, adding to expectations the Fed will tighten in next meeting, the pair may fall to this level.
Today, the price index of personal consumption (PCE) and labor costs (ECI) of the United States was announced. Two indicators are showing inflation of the largest economies in the world. As predicted by Bloomberg, the index measuring inflation by the Fed may prefer a 0.2% increase in September compared with the same period last year, up slightly from the 0.2% gain in May 8. But this figure is still below Fed’s 2% target.
ECI index is expected to rise 0.6% compared with 0.2% figures last month. ECI is seen as the most comprehensive index of labor costs. ECI measures labor costs, including wages, salary and benefit costs of employees as well as insurance of all kinds. Unlike the average hourly earnings AHE, ECI is not affected by shifts between low-wage industries and high-paying or low-paying job in the relationship between the industries. ECI represents labor costs for full-time employment the same.
If the CPI shows positive signs, strengthened expectations the Fed to raise interest rates, and dollar backed up, so will drag the pair down, and vice versa.
At 2:10 pm GMT+7, the pair is trading at $1.09841, little changed compared with the opening price $ 1.09448.
Forecast: EUR/USD is moving toward support at $ 1.08000 zone is set after 5 years this month. The pair is still in a downward trend at the prospect of the Fed raising interest rates and the European Central Bank (ECB) eased QE package. In the last session of the week, last month today, the pair will likely not have large fluctuations. Projections, the pair could climb reaching $ 1.11000. However, if the US economic data today more optimistic than predictions, the pair may fall to the price of $ 1.09000.