The EUR/USD exchange rate is experiencing a decline for the fourth consecutive day, driven by a strengthening US dollar and market anticipation of upcoming US inflation figures. This movement reflects investor sentiment as they brace for potential shifts in monetary policy and economic outlook.
Later today, the US Consumer Price Index (CPI) data is due, and expectations are set for an increase to 2.6% year-over-year in October, a rise from September’s 2.4%. Core inflation is anticipated to remain steady at 3.3%. Should these inflation figures exceed expectations, the market may further adjust its outlook on the Federal Reserve’s interest rate cut timeline, potentially pushing back anticipated cuts.
The US dollar’s recent strength is partly attributed to market reactions following Trump’s victory. There’s a growing expectation that the Federal Reserve might adopt a more cautious approach to interest rate cuts due to the inflationary potential of the new administration’s policies. Market probabilities for a December rate cut have decreased to 60%, down from 80% before the election results, indicating a shift in market sentiment regarding near-term monetary easing.
The Euro has seen a significant drop in value since Donald Trump’s victory, primarily fueled by concerns regarding the impact of trade tariffs on the already vulnerable Eurozone economy. The imposition of tariffs could impede economic growth in the Eurozone, potentially compelling the European Central Bank (ECB) to consider more aggressive interest rate cuts to stimulate the economy.
Adding to the economic concerns, the German ZEW economic sentiment index released yesterday showed weaker-than-expected results. This reflects growing anxiety over potential trade tariffs instigated by the new US administration and ongoing political uncertainties within Germany, further weighing on the Euro’s performance against the US dollar.
Today’s Eurozone economic calendar is relatively quiet. Market participants are now keenly awaiting tomorrow’s GDP figures, which are expected to offer deeper insights into the economic health of the Eurozone. These figures will be crucial in assessing the Eurozone’s resilience amidst global economic shifts.
EUR/USD Technical Analysis – November 13th Outlook
After encountering resistance at the 100-day Simple Moving Average (SMA), EUR/USD has reversed direction, declining below several key support levels, including the 200-day SMA. The pair is currently testing the 1.06 level, which marks the April low, indicating significant bearish momentum.
For sellers, the immediate goal is to extend this downward trend by breaching the 1.06 support level. A successful break below this point could pave the way for further declines towards the 1.05 psychological level and potentially 1.0450, the 2023 low. These levels are critical for traders monitoring the EUR/USD pair for potential entry points.
Conversely, for any potential recovery in the EUR/USD price, the pair would first need to climb above 1.0670, the June low. Regaining the 1.07 level would be essential to signal a more substantial recovery and potentially extend gains towards 1.08. A move above this level would be necessary to negate the current near-term bearish trend and suggest a shift in market dynamics.
FTSE Cautiously Recovers from 3-Month Low Amid Inflation Data Watch
UK stock markets are showing signs of cautious recovery, inching higher after closing at a three-month low on Tuesday. Investors are now cautiously looking ahead to the US inflation data release, which is expected to influence global market sentiment.
The FTSE has faced headwinds since Trump’s victory, experiencing declines in five out of the last six trading days. Market participants are increasingly factoring in the possibility of President-elect Trump implementing trade tariffs and adopting a more assertive stance on trade relations with Europe and China. These potential policy shifts are creating uncertainty and impacting investor confidence in UK equities.
Economic data released yesterday revealed that UK wage growth accelerated more than anticipated in September. However, the unemployment rate also unexpectedly increased. This mixed economic picture places the Bank of England (BoE) in a challenging position as it deliberates on a potential interest rate cut in December. Recent comments from Bank of England chief economist Huw Pill suggested that wage growth remains persistently high, indicating that a February rate cut might be more probable than a move in December.
Market focus is now heavily on the upcoming US inflation data later today. Weaker-than-expected US inflation figures could increase market expectations of the Federal Reserve cutting rates in December. Such a scenario would likely be viewed positively by stock markets, potentially providing a boost to indices like the FTSE.
The UK economic calendar is light today, with attention shifting to UK GDP and retail sales figures due later in the week. These data points will provide further insights into the health of the UK economy and potentially influence market direction.
In company-specific news, Smith Group shares saw a significant jump of 21% to reach a record high. This surge followed the company’s upward revision of its revenue and margin forecasts, driven by strong performance across all its divisions and the commencement of its shareholder buyback program.
Conversely, shares of Experience traded lower despite positive guidance. This could be attributed to a weaker-than-expected recovery in its Latin American broker-to-broker business segment, suggesting that market participants are scrutinizing regional performance variations within companies.
FTSE Technical Analysis – Current Market Indicators
The FTSE has recently broken out of its established trading range of 8150 – 8325, a range it had maintained since May. The index has formed a pattern of lower lows and lower highs, signaling a potential shift in trend. It has also breached the 200-day SMA for the first time this year, as the price moves towards the 8000 level. Adding to the bearish signals, the 50-day SMA is crossing below the 200-day SMA, often interpreted as a sign of further potential downside.
Should sellers manage to push the price below the 8000 support level, this could open the door to further declines towards 7910, the low recorded on August 5th. These levels are critical for assessing potential downside risk and support areas for the FTSE.
On the upside, immediate resistance is anticipated around 8120, coinciding with the 200-day SMA, and further up at 8150. Beyond these levels, 8250, near the 100-day SMA, would come into focus as a significant resistance point. These resistance levels are crucial for monitoring potential upward movements and areas where selling pressure might intensify.
