Yesterday (1/12), EUR/USD rebounded strongly, halting the slide lasted 4 days. Ending the session, the pair closed at $1.06300, up 0.64% over the closing price of $1.05623.
Euro rally against the US dollar was supported by the positive economic data from the euro zone. The report showed that the unemployment rate reached 10.7% in October, the lowest rate recorded since 1/2012 and more positive than forecast figure of 10.8%. Purchasing managers index (PMI) in manufacturing sector reached 52.8 points in November, higher than the 52.3 points in October.
Research group Markit released manufacturing purchasing managers index (PMI) of German- the largest economy in Europe, rising 52.9 points in November. Also in Germany, the figures of unemployment decreased 13,000 in the previous month, surpassing forecasts for 5,000.
In recent weeks, the European Central Bank (ECB) repeatedly signed that the central bank was ready to strengthen easing measures to boost growth and inflation of manufacturing. The positive data showed the euro zone’s economy is on the rebound, but it is difficult to reverse what the markets expect at the ECB meeting this Thursday, ECB officials likely to act more “gentle”. Euro devaluation are expected not too deep, which supported Euro to go up.
Meanwhile, US manufacturing activity fell to its worst in three years after the PMI report by the Institute of Supply Management (ISM) announced only at 48.6 points. This is the first time the index is lower than the threshold of 50 points since 11/2012. The amount of new orders also lost 4 points to 48.9 points, the bottom for over 3 years.
Yesterday, chairman of the US Federal Reserve (Fed) Chicago branch expressed concern about the upcoming decision of Fed policy meeting in mid of this month. Speaking to the Lansing Chamber of Commerce in Michigan, Charles Evans said: “One possibility is that we begin to raise interest rates and then realized we had misjudged the health of the economy and inflation prospects will go up. To bring the economy back to the trajectory, we would have to put on a 0% interest rate and may even resort to tools nontraditional policies, such as asset purchase program colossal” . Mr. Evans said he expected inflation as measured by the price index of personal consumption (PCE) will remain below 2% until 2018.
In the context of the data is not encouraging additional statements did not support his tight Evans, confidence in the dollar is somewhat declining which put currency downward pull, causing the pair prospered.
Today, the market focus is the speech by the official Federal Open Market Committee (FOMC), including Fed president, Janet Yellen; Atlanta Fed branch president Dennis Lockhart; and San Francisco Fed President John Williams. Investors expect to receive signals in nature tightening to strengthen the ability of the Fed to raise interest rates.
Besides, the economic data will be published. In Europe the consumer price index (CPI) and core CPI; producer price index (PPI) will be realised. In the US, ADP will publish Non-Farm Employment Change. This index indicates the changes in the number of people with jobs in November, except the industrial sector and the state.
Forecast: The pair is still in decline due to pressure from the monetary policy of the Fed and the ECB were mixed. While the ECB is expected to strengthen the Fed easing back to stand before the economic crunch for the first time in nearly a decade. Euro rose yesterday but still approaching the bottom 8 months. Prediction shock yesterday after the pair turned down will fall below $1.05500.
However, in the context of Fed officials are reluctant and the market is focusing on the path rather than the time of raising interest rates, the pair therefore is likely to continue going up, heading to the $1.06700.
Analyses of Group IF24h