EUR/USD: Limited Movement Ahead Of US Data

 | Oct 15, 2014 03:51AM ET

EUR/USD is showing little movement on Wednesday, as the pair trades in the mid-1.26 range in the European session. On the release front, German CPI was unchanged at 0.0%. ECB President Mario Draghi will speak at two ECB events in Frankfurt. In the US, we’ll get a look at the first major events of the week – Core Retail Sales, Retail Sales and PPI.

It’s been a rough week for Eurozone releases. German ZEW Economic Sentiment, a key indicator, dropped sharply to -3.6 points. This reading was the first contraction since October 2012 and points to pessimism among investors and analysts. There was no relief from Eurozone data, as ZEW Economic Sentiment dropped to just 4.1 points, compared to 14.2 a month earlier. Industrial Production came in at -1.8%, its third decline in four readings. The Eurozone continues to struggle, and we’re likely to see the downward trend continue, which bodes badly for the struggling euro.

The US dollar has enjoyed a superb run at the expense of the euro, gaining some 500 points since the start of September. However, the greenback’s rally was interrupted by last week’s FOMC minutes, which were unexpectedly dovish. In the minutes, the Fed poured some cold water on rising expectations of a rate hike, as a number of policymakers said that the Federal Reserve should take a more data-dependent approach regarding a rate hike. The Fed also voiced concern about the rising strength of the US dollar which could weigh on the recovery. On the weekend, FOMC member Stanley Fischer said that the Fed could slow tightening if global growth is weaker than expected. Strong US numbers have raised expectations about a rate hike, but the Fed appears to be taking a cautious approach towards the timing of a rate hike. Still, with QE set to wind up by the end of the month, rising speculation about higher rates bodes well for the US dollar.