Although the EUR/USD currency pair is treading water, the cross proves to be relatively resilient against most other currency crosses per recent Scotiabank {{ cid }} {{/cid}} analysis. US data releases have come back online after a brief government shutdown. While bringing some much-needed stability to a number of core economic indicators, this resumption. Market participants are bracing themselves for the worst of the data that’s to come. At the same time, the Germany/US yield spreads are rising within their narrow recent range, providing powerful support to the euro.
Friday brings the release of preliminary Purchasing Managers’ Index (PMI) figures, which have the potential to impact market sentiment even more. Analysts are certainly watching these actions closely. They do believe that once US data starts coming back with some frequency it will have a big effect on market dynamics again.
The eurozone has just confirmed its final CPI data. Indeed, they reassured us that the upstream headline CPI has been holding steady at 2.1% year-over-year. No surprise there, but the core CPI stayed unchanged at a 2.4% YOY, consistent with market forecasts.
“Final euro area CPI figures were released in line with expectations, holding steady at 2.1% y/y (headline) and 2.4% y/y (core).” – Scotiabank’s Chief FX Strategists Shaun Osborne and Eric Theoret
After the Mar 3 high, the EUR has retraced somewhat. So far, it has found a comfortable home in a tight range just above the support level of 1.1580. Market analysts suggest that this stability reflects a balance between optimism regarding the eurozone’s economic outlook and caution surrounding potential volatility from US data releases.
With US data releases starting up again, there is a heightened sensitivity among market participants to more general economic trends.
“Broader developments are thus expected to continue to dominate as market participants assess the post-shutdown resumption of US data releases.”
The widening yield spreads between Germany and the United States have supported the euro further. This suggests a growing confidence in the eurozone’s economic fundamentals, despite the deterioration of conditions in the US market.