EUR/USD is struggling below 1.1000, as the US Dollar clings to recovery gains in Asian trading hours on Thursday. Wednesday’s softer-than-expected German and Spain inflation data weighed on the Euro. Investors await the Eurozone inflation data on Thursday for fresh impetus.
Eurozone inflation data awaited for fresh impetus
The EUR/USD hit a fresh three-month high at 1.1016 but failed to hold above 1.1000 and pulled back, despite risk appetite. Inflation slowed further in Europe, while the US economy showed even stronger growth than previously reported during the third quarter. The Greenback remains vulnerable ahead of the US data.
German and Spain inflation data could fuel speculation about rate cuts from ECB
In Germany, inflation, measured by the Consumer Price Index (CPI), declined to 3.2% on a yearly basis in November from 3.8% in October, below the market expectation of 3.5%. In Spain, the annual rate slowed from 3.5% to 3.2%. On Thursday, Eurostat will release Eurozone CPI. Also due are German Retail Sales and the Unemployment Rate.
If inflation from the Eurozone confirms what Spain and Germany data have already shown, it could fuel further speculation about rate cuts from the European Central Bank (ECB). However, ECB officials will want to see more data before turning decisively dovish, particularly as economists warn that inflation is likely to rebound in the next two months. In any case, it is welcomed news for the ECB.
US data includes Core PCE Price Index and Jobless Claims
Data released on Wednesday revealed that the US economy expanded in the third quarter at a 5.2% annualized rate, above the previously reported 4.9%. The number helped bolster the US Dollar as it served as reassurance about the performance of the US economy. However, the Beige Book later suggested that economic activity slowed in the period prior to November 18.
On Thursday, US data to be released includes the Core Personal Consumption Expenditures Price Index and the weekly Jobless Claims. Both reports are critical and could trigger more losses for the US Dollar if they show inflation slowing further and a softer labor market.
GBP/USD attracts buyers near 1.2700, softer US Dollar offers support
The GBP/USD pair attracts some buyers below the 1.2700 psychological mark during the early Asian session on Thursday. That being said, the softer US Dollar offers some support to the major pair. GBP/USD is trading near 1.2695, up 0.02% on the day.
US Dollar declines following dovish comments from Fed officials
Following Tuesday’s sharp US Dollar decline, the GBP/USD pair traded as high as 1.2732, its highest since late August. The Greenback collapsed following surprising dovish comments from Federal Reserve (Fed) officials, reinforcing the market’s belief that the central bank is done with rate hikes.
US government bond yields continue to decline
Meanwhile, a continued decline in US government bond yields limits USD gains. The 10-year Treasury note currently offers 4.29%, its lowest in two months, while the 2-year note pays 4.70%, the lowest since mid-July.
US Q3 GDP estimate expected to confirm annual growth at 5%
The United States (US) will release the second estimate of the Q3 Gross Domestic Product (GDP), which is expected to confirm the annual pace of growth at 5%, slightly better than the previous 4.9%. Additionally, multiple Federal Reserve speakers will be on the wire, while Bank of England (BoE) Governor Andrew Bailey will deliver brief remarks at an event celebrating the 50th anniversary of the London Foreign Exchange Joint Standing Committee.
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