EUR/USD – Sharp Losses for Euro After Fed Statement

The euro is flat on Thursday, as EUR/USD trades at the 1.13 line in the European session. On the release front, German Preliminary CPI will be released later in the day. The markets are braced for a sharp decline of 0.8%. German Unemployment Change matched the forecast, with a drop of 9 thousand. In the US, today’s key events include Unemployment Claims and Pending Home Sales.

On Wednesday, the Federal Reserve reiterated that it would be “patient” regarding the timeline for a raise in interest rates, which have been close to zero since 2008. However, the Fed also noted that the US economy was expanding at a “solid pace” and this vote of confidence helped the dollar post sharp gains against the euro. The markets expect the Fed to raise rates sometime during the year, so the “Fed rate watch” is sure to continue, as the markets look for clues as to when the Fed will make a move.

German confidence indicators continued to point upwards in January. GfK German Consumer Climate improved to 9.3 points, edging above the estimate of 9.2 points. The key indicator has now risen for four consecutive releases, as the German consumer remains optimism. This follows an excellent business confidence report. German Ifo Business Climate rose for a fourth straight month, hitting 106.7 points which matched the estimate. This marked a six-month high.

Earlier in the week, US durable good reports disappointed, as Durable Goods Orders plunged 3.4%, marking a 4-month low. There was no relief from Core Durable Goods Orders, which declined by 0.8%, its fifth drop in six readings. The markets had expected gains from both indicators. There was much better news later in the day, as CB Consumer Confidence jumped to 102.9 points, crushing the estimate of 95.3 points. New Home Sales followed suit, rising to 481 thousand, well above the forecast of 452 thousand.

EUR/USD 1.1318 H: 1.1327 L: 1.1261