Euro stretches to new highs following downbeat US GDP data

The Euro jumps to 1.1000 as the final US GDP disappoints.
US economic growth revised down to 4.9% in the third quarter from the previous 5.2% estimation.
The focus is now on the US PCE Price Index for more cues on the Fed’s policy outlook.

Guillermo Alcala FXStreet

The Euro (EUR) extended gains on a thin pre-Cristmas session to reach session highs at 1.1000, following a downward revision of the United States (US) third quarter's Gross Domestic Product (GDP). Recent data by the US Bureau of Economic Analysis revealed that the US economy grew at a 4.9% yearly rate, down from the preliminary estimations of a 5.2% increase.

Apart from that, the Philadelphia Fed Manufacturing survey signaled a further-than-expected deterioration in the region´s business conditions and the Personal Consumption Expenditures declined against expectations.

These figures have offset the positive impact of jobless claims data, endorsing the narrative of a soft landing and boosting hopes of the Federal Reserve's (Fed) rate cuts in early 2024. This scenario increases the interest on Friday's PCE Price Index, which is for further info about the timing of the US Central Bank´s next move.

Daily digest market movers: Euro reaches fresh highs after the downward US GDP revision

US Q3 GDP revised to a 4.9% year-on-year growth from the previous 5.2% estimation.
The Philadelphia Fed Manufacturing index dropped to -10.5 from -5.9 in November; the market expected a moderate improvement to -3.
US Personal Consumption Expenditures eased to 2.6% in Q3, the consensus anticipated a 2.8% reading, unchanged from Q2.
US Jobless claims increased by 205K from 203K in the previous week, well below the 215K expected.
Fitch ratings anticipate slower global growth in 2024 and rate cuts by the Fed, the ECB, and the BoE.
US data has hammered the Dollar sending the US Dollar Index (DXY) to test multi-month lows at 101.80.
Investors are pricing a nearly 75% chance of a quarter-point rate cut in March followed by another one in May, according to data by the CME Group Fed Watch Tool.
The main focus no is the US PCE Prices Index, due on Friday. The Fed’s preferred inflation measure is seen dipping below the 3% year-on-year rate for the first time in almost three years. A soft PCE inflation reading would increase bearish pressure on the USD.

Technical Analysis: Euro jumps to 1.1000 as US GDP data disappoints

From a technical perspective, the pair has regained bullish momentum to reach the 1.1000 psychological level, with the US Dollar index increasing bearish pressure. Euro bulls, however, are likely to be challenged at the 1.1010 area with investors reluctant to place significant bets against the USD ahead of Friday's US PCE inflation data.

Above 1.1010, the next targets would be the August high at 1.1060, and the July 24 and 27 high at 1.1150.

To the downside, the pair should break the 1.0880 and the 4-hour 100 Simple Moving Average (SMA) at 1.0870 to increase bearish pressure. In this scenario, bears’ focus could shift towards 1.0825 on the way to December lows at 1.0715.

Euro price this week

The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the Swiss Franc.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.78%	0.13%	-0.23%	-0.99%	0.30%	-0.88%	-1.39%
EUR	0.78%		0.91%	0.56%	-0.20%	1.08%	-0.09%	-0.59%
GBP	-0.13%	-0.92%		-0.36%	-1.14%	0.15%	-1.02%	-1.52%
CAD	0.23%	-0.57%	0.35%		-0.77%	0.52%	-0.66%	-1.17%
AUD	0.99%	0.21%	1.11%	0.76%		1.28%	0.11%	-0.39%
JPY	-0.30%	-1.09%	-0.16%	-0.52%	-1.29%		-1.19%	-1.69%
NZD	0.87%	0.08%	1.01%	0.66%	-0.11%	1.17%		-0.51%
CHF	1.36%	0.59%	1.51%	1.16%	0.39%	1.67%	0.51%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Economic Indicator

United States Personal Consumption Expenditures - Price Index (YoY)

The Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The YoY reading compares prices in the reference month to a year earlier. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

AUD/USD edges higher as hot CPI inflation and hawkish RBA lift rate hike bets

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar edges higher against the US Dollar as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia rate hikes.

USD/JPY meets support near 157.00

USD/JPY retreats for the third consecutive day on Friday, revisiting the 157.00 region before attempting some recovery as investors continue to assess the latest BoJ meeting, where the central bank left rates unchanged, as widely anticipated.

Gold sinks to fresh yearly lows despite risk-off mood as Fed rate hike bets weigh

Gold slips to fresh year-to-date lows on Friday. The metal struggles despite a risk-off mood across markets, as expectations of further Federal Reserve (Fed) interest rate hikes continue to dominate price action, leaving Gold on track to end the month in negative territory.

Ripple Price Forecast: XRP bulls defend $1.20 as sell-side pressure triggers liquidations

Ripple (XRP) trades around $1.25 on Friday, rising from a short-term support level established at $1.20. This minor upward correction follows a sharp sell-off, triggered amid reports of a hack attack on the Binance exchange that impacted approximately $6.3 billion. The attack drove the broader crypto market on edge, as Binance suspended both deposits and withdrawals to contain the situation.

BoJ recap: A pause for now... but Japan has entered a new inflation phase

The Bank of Japan left its short-term policy rate unchanged at 1.25% but delivered a distinctly hawkish message on the risk of an inflation overshoot. The decision passed by 8-1, with board member Takata dissenting in favour of an increase to 1.5%, while Governor Kazuo Ueda stressed that the Bank would continue adjusting policy as needed.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.