Ahead of the release of construction output data for the Eurozone the common currency was in line to post a five-day decline of 0.4 per cent against the US Dollar.
While the ‘Greenback’ fluctuated yesterday as restrained US inflation data gave the Federal Reserve scope to hold interest rates at record lows for longer, the safe-haven asset ended local trading stronger against its main currency rivals as initial jobless claims rose by less-than-forecast and the Philadelphia Fed index climbed by more-than-expected.
Since the Federal Reserve shocked investors by opting to taper the pace of asset purchases when it met in December, the US Dollar has posted widespread gains. Although the currency trimmed its advance following the release of unexpectedly poor non-farm payrolls figures, many economists believe a dip in the labour market won’t deter the Federal Reserve from its tapering goal.
According to currency strategist Yuki Sakasai; ‘The Fed will not slow the pace of tapering. The Dollar is being bought back on the week. I don’t think it will fall much further.’
But the Euro could claw back losses if today’s construction output report for the Eurozone shows a rebound in production.
Seasonally adjusted construction output dropped by 1.2 per cent in November, month-on-month, and 2.4 per cent year-on-year.
However, several influential economic reports for the US are also due out today.
If US building permits, housing starts, Industrial production and manufacturing production data show improvement the EUR/USD pairing could end the week on the back foot.
The University of Michigan Confidence Index is also forecast to rise from 82.5 in December to 83.5 in January.
The Euro was little affected by a report published by The Economist regarding the risks of Eurozone deflation.
In the opinion of European Political Economics Professor Paul De Grauwe; ‘The only institution that can prevent disinflation from turning into deflation is the European Central Bank. But that institution is staying on the sidelines, observing and doing nothing. It is paralysed by internal dissension that prevents it from increasing liquidity in the system, the only sure way to prevent deflation.’
Next week EUR/USD movement may be occasioned by the German and Eurozone ZEW economic sentiment surveys, German/Eurozone manufacturing and services PMI, Eurozone consumer confidence, US initial jobless claims and US existing home sales data.
Euro (EUR) Exchange Rates
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