EUR/USD – Euro Gains as German Investor Confidence Shines

EUR/USD has posted gains on Tuesday, recovering from losses sustained a day earlier. In the European session, the pair is trading slightly above the 1.25 line. On the release front, German ZEW Economic Sentiment climbed to 11.5 points, while Eurozone ZEW Economic Sentiment followed suit, rising to 11.0 points. In the US, today’s highlight is US Producer Price Index, a key inflation indicator. The markets are expecting another weak reading, with an estimate of -0.1%.

German investor confidence soared in November, as ZEW Economic Sentiment rose to 11.5 points, compared to -3.6 points in the previous release. This crushed the forecast of 0.9 points and marked a 4-month high for the key indicator. It was a similar story with Eurozone ZEW Economic Sentiment, which jumped to 11.0 points, easily beating the estimate of 4.3 points. The thumbs-up from investor confidence followed the news that Germany had avoided a recession with a small 0.1% gain in GDP in Q3.

ECB head Mario Draghi and his colleagues are under strong pressure to “do something” to kick-start the weak Eurozone economy. Deep interest rate cuts haven’t had much effect, so the ECB has purchased covered bonds and asset-backed securities. So far, these securities have been from the private sector, and the ECB could decide to expand these purchases to government bonds, known has quantitative easing. However, there is resistance to quantitative easing from national central banks, such as the powerful Bundesbank. Speaking before a European parliamentary committee on Monday, Draghi said that further stimulus measures could include government bonds.

US consumer indicators looked strong on Friday. Retail Sales and Core Retail Sales both posted gains of 0.3%, edging above the estimate of 0.2%. UoM Consumer Sentiment continued its upward trend, climbing to 89.7 points in November. This was the indicator’s strongest performance since July 2007. Meanwhile, US Unemployment Claims has looked solid in recent readings, but the key indicator jumped to 290 thousand, missing the estimate of 282 thousand. This marked a seven-week high for the key indicator. The news wasn’t any better from JOLTS Jobs Openings, which weakened to 4.74M, down from 4.84M a month earlier. The estimate stood at 4.81M.

EUR/USD 1.2518 H: 1.2538 L: 1.2449