EUR/USD is stable on Thursday, as the pair trades in the low-1.25 range. On the release front, Eurozone PMI data disappointed, as Eurozone and German data weakened in November. On a bright note, French PMIs showed slight improvement. In the US, it’s busy day, with three key indicators – Core Retail Sales, Retail Sales and Unemployment Claims. Any unexpected readings from these events could translate into some volatility from EUR/USD.
Eurozone and German PMIs softened in November, underscoring weakening activity in the manufacturing and services sectors. German Flash Manufacturing PMI dipped to 50.0 points, the separator between contraction and expansion. This marked the first month that the key indicator has failed to show expansion since June 2013. Eurozone Flash Manufacturing followed course, dipping to 50.4 points. This was the lowest reading recorded since June 2013.
Despite the stagnant Eurozone economy, 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.
The ECB hasn’t had much success in kick-starting the ailing Eurozone economy. 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. Speaking before a European parliamentary committee on Monday, Draghi said that QE remains at option. If the ECB does decide to make such a move, the wobbly euro could lose more ground.
EUR/USD 1.2528 H: 1.2574 L: 1.2505
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