- Hopes of progress in US-China trade talks boost dollar.
- Annual core CPI in US comes in slightly higher than market expectation.
- Economic confidence both in Germany and eurozone deteriorates in August.
Despite the disappointing macroeconomic data releases from the euro area earlier in the day, the EUR/USD pair held above the 1.12 mark but came under strong bearish pressure in the second half of the day as the Greenback capitalized on the latest developments surrounding the US-China trade dispute. As of writing, the pair was trading at 1.1175, losing 0.33% on a daily basis.
The closely-watched ZEW Economic Sentiment Index in Germany slumped -44.1 in August to miss the market expectation of -21.7 by a wide margin. Similarly, the same reading for the eurozone plummeted to -43.6 from -20.3 in July. Commenting on the data, “The ZEW Indicator of Economic Sentiment points to a significant deterioration in the outlook for the German economy.," noted ZEW President Professor Achim Wambach.
"The most recent escalation in the trade dispute between the US and China, the risk of competitive devaluations, and the increased likelihood of a no-deal Brexit place additional pressure on the already weak economic growth. This will most likely put a further strain on the development of German exports and industrial production.”
USD gains traction on trade optimism
Although the broad-based USD weakness didn't allow the ZEW data to pull the pair lower, the US Trade Representative's office announced the Trump administration's decision to delay additional tariffs on some Chinese imports until December 15 helped the Greenback find demand and weighed on the pair.
The improved market sentiment on renewed trade optimism caused the US 10-year Treasury bond yield to rise sharply and supported the USD's recovery. Moreover, the probability of the Federal Reserve making an aggressive 50 basis points rate cut in September weakened to provide an additional boost to the currency. The US Dollar Index erased all of yesterday's gains and rose to a six-day high of 97.80.
Meanwhile, the data published by the US Bureau of Labor Statistics today showed that annual inflation, as measured by the core Consumer Price Index, rose to 2.2% in July and came in higher than the market expectation of 2.1%.
Tomorrow, economic growth figures from both Germany and the euro area will be watched closely by market participants. The real Gross Domestic Product in Germany is expected to contract by 0.1% in the second quarter and the shared currency is likely to meet a fresh selling wave if the data disappoint.
Technical levels to watch for
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD remains under pressure above 0.6400
AUD/USD managed to regain some composure and rebounded markedly from Tuesday’s YTD lows in the sub-0.6400 region ahead of the release of the Australian labour market report on Thursday.
EUR/USD holds above 1.0650 amid renewed selling pressure in US Dollar
The EUR/USD pair edges higher to 1.0672 on Thursday during the early Asian session. The recovery of that major pair is bolstered by renewed selling pressure in the US Dollar and a risk-friendly environment.
Gold retreats as lower US yields offset the impact of hawkish Powell speech
Gold prices retreated from close to weekly highs during the North American session on Wednesday amid an improvement in risk appetite. The bullish impulse arrived despite hawkish commentary by US Federal Reserve officials.
Bitcoin price uptrend to continue post-halving, Bernstein report says as traders remain in disarray
Bitcoin price is dropping amid elevated risk levels in the market. It comes as traders count hours to the much-anticipated halving event. Amid the market lull, experts say we may not see a rally until after the halving.
Australia unemployment rate expected to rise back to 3.9% in March as February boost fades
Australia will publish its monthly employment report first thing Thursday. The Australian Bureau of Statistics is expected to announce the country added measly 7.2K new positions in March after the outstanding 116.5K jobs created in February.