EUR/USD is very quiet on Tuesday, as the pair trades in the mid-1.24 range in the European session. On the release front, German GDP posted a weak gain of 0.1%, matching the forecast. In the US, there are two key events on the schedule – Preliminary GDP and CB Consumer Confidence.
The euro hasn’t had much to cheer about lately, and the currency took a tumble on Friday, losing over 150 points. This was a result of remarks from ECB head Mario Draghi, who warned that that inflation expectations were declining to levels that were very low and said the ECB is ready to expand its stimulus program. Deep interest rate cuts haven’t boosted growth or inflation, so the ECB has reached deeper into its toolbox and purchased covered bonds and asset-backed securities. So far, these purchases have been from the private sector, but the ECB could decide to expand these purchases to government bonds, known has quantitative easing (QE). However, there is strong resistance to QE from national central banks, such as the powerful German Bundesbank.
All eyes are on US GDP for Q3, which will be released later on Tuesday. The markets are expecting a strong gain of 3.3%. This is not as strong as the Q2 release, which posted a gain of 4.2%. If the indicator meets or exceeds expectations, we could see the US dollar post gains in the North American session.
EUR/USD 1.2434 H: 1.2444 L: 1.2416
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