US markets are open for limited hours today, and investors are focussed on the World Cup and Black Friday rather than the US dollar. EUR/USD is trading quietly at 1.0392, down 0.18%.
German data has not been spectacular this week, but nonetheless is moving in the right direction, as the German economy is in decent shape. Germany’s GDP for Q3 was revised upwards to 0.4% QoQ, up from 0.3% and ahead of the consensus of -0.2%. This follows a 0.1% gain in GDP in Q1 and is all the more impressive, considering the headwinds on the global scene, in particular the war in Ukraine. Germany has made a mammoth effort to stockpile energy supplies and end its dependence on Russia, which should mean that an energy crisis can be avoided this winter.
German Consumer confidence remains weak but improved slightly for a second straight month. The November reading rose to -40.2, up from -41.9, although shy of the consensus of -39.6. Business confidence also edged higher earlier this week, as did Business Expectations.
ECB says more rate hikes needed
The ECB minutes, released on Thursday, indicated that ECB members remained concerned about inflation becoming entrenched. Members were clear about the need to raise rates in order to bring inflation back down to the 2% target, and most members supported the 75-bp hike at the October meeting, with a few voting for a 50-bp move. The markets have priced in a 50-bp increase at the December 15 meeting, after ECB policymakers hit the airwaves and urged that the ECB slow down the pace of rate hikes. Still, with inflation at a crippling 10.6%, there’s little doubt that the ECB will have to continue raising rates, and the markets expect the deposit rate, currently at 1.5%, to hit 3.0% in 2023.
EUR/USD Technical
- 1.0359 and 1.0238 are providing support
- There is resistance at 1.0447 and 1.0568