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Euro US Dollar (EUR USD) Exchange Rate Climbs on Disappointing US Data

The Euro US Dollar (EUR USD) exchange rate’s rise continued on Thursday, with demand for the ‘Greenback’ suffering from a slew of soft domestic data releases and the Euro gaining despite a mixed economic outlook from the European Central Bank (ECB).

Euro US Dollar (EUR USD) Extends Gains, Unperturbed by ECB Economic Bulletin Release

The Eurozone’s economic expansion is set to remain solid and broad based in 2018, the ECB announced in their latest bulletin, with inflation also set to steadily increase.

The bulletin read:

‘Overall, incoming data releases are generally pointing to an unabated upside growth momentum in the fourth quarter of 2017 and around the turn of the year, with robust growth expected to continue in 2018’.

It should also be pointed out, however, that in order to facilitate the gradual rise in inflation the bank still asserts that an ample degree of monetary accommodation is required.

This could potentially leave the ECB dovish in 2018, with the focus continuing to remain on reductions to the bank’s quantitative easing (QE) programme rather than any interest rate hikes.

Because of this, the market reaction to this news was ultimately minimal, with the upbeat growth expectations already being predominantly known and the issue of limp consumer prices also already expected.

US Dollar (USD) Exchange Rates Encumbered by Soft Domestic Data

Domestic data from the US today proved mostly soft.

The US advance goods trade deficit expanded in November from -$68.1b to -$69.7b rather than shrinking to -$67.9b, as markets originally expected.

Beyond this, the number of Americans filing for unemployment benefits stayed mostly unchanged at 245k in the week ending December the 23rd, the same as the previous period but slightly above the market expectation of 240k.

This is the highest number since the week ending November the 11th though it should be pointed out that claims continue to be disrupted in the Virgin Islands and Puerto Rico.

In other, slightly better news, the MNI Chicago business barometer climbed to 67.6 in December, up from the previous period’s 63.9 and smashing the market expectation of 62.

This proved the highest reading since March 2011, with both output and demand rising to multi-year highs.

Additionally, production increased the most in 34 years, with order backlogs also growing.

This news did not, however, bolster the US Dollar, with markets still hesitant to invest too heavily into the ‘Greenback’ in light of the widening trade deficit and uncertainty regarding the recent sweeping tax overhaul.

Euro US Dollar (EUR USD) Forecast: German Inflation Figures Ahead

Whilst trading will likely remain thin over the holiday period, markets are anticipating tomorrow’s December German consumer price index release, with inflation in the Bloc’s strongest economy forecast to slip from 1.8% to 1.5%.

If this occurs then the single currency could come under renewed pressure, particularly with the Eurozone struggling to push its overall inflation rate to target levels.

This will likely prove the last pertinent domestic data release before the end of the holiday period.