HomeContributorsFundamental AnalysisRecent Surge In Euro 'New Headwind' For Inflation, Warns ECB's Draghi

Recent Surge In Euro ‘New Headwind’ For Inflation, Warns ECB’s Draghi

For the 24 hours to 23:00 GMT, the EUR declined 0.66% against the USD and closed at 1.2378, after the European Central Bank (ECB) President warned of recent volatility in the Euro.

The ECB Chief, Mario Draghi, cautioned that recent surge in the Euro could risk derailing the inflation progress in the medium-term and emphasised that the central bank would remain patient and persistent in its efforts until inflationary pressures build up sustainably. Nevertheless, he expressed confidence that the robust economic rebound across the common currency region would push inflation towards the central bank’s 2.0% goal.

On the macro front, the Euro-zone’s final Markit services PMI was revised higher to a level of 58.0 in January, expanding at its quickest pace in nearly 11 years. The preliminary figures had indicated a rise to a level of 57.6, compared to a level of 56.6 in the previous month.

On the other hand, the region’s Sentix investor confidence index unexpectedly dropped to a level of 31.9 in February, defying markets expectations for a rise to a level of 33.2. The index had registered a reading of 32.9 in the previous month. Further, the region’s seasonally adjusted retail sales retreated 1.1% on a monthly basis in December, more than market anticipation for a fall of 1.0% and compared to a revised gain of 2.0% in the prior month.

Separately, activity in Germany’s services sector climbed more than initially estimated to a level of 57.3 in January, accelerating by the most in nearly 7 years. In the prior month, the PMI had registered a reading of 55.8, while the flash print had indicated an advance to a level of 57.0.

Meanwhile, German Chancellor, Angela Merkel’s conservatives and the Social Democrats (SPD) failed to conclude coalition negotiations yesterday.

Macroeconomic data released in the US indicated that the ISM non-manufacturing PMI climbed more-than-anticipated to a level of 59.9 in January, jumping to its highest reading since August 2005, driven by robust growth in new orders. The PMI had registered a revised reading of 56.0 in the previous month, while markets were anticipating for a rise to a level of 56.7.

Meanwhile, the nation’s final Markit services PMI dropped to a level of 53.3 in January, confirming the preliminary figures. In the prior month, the PMI had registered a reading of 53.7.

In the Asian session, at GMT0400, the pair is trading at 1.2373, with the EUR trading a tad lower against the USD from yesterday’s close.

The pair is expected to find support at 1.2327, and a fall through could take it to the next support level of 1.2281. The pair is expected to find its first resistance at 1.2447, and a rise through could take it to the next resistance level of 1.2521.

Going ahead, Germany’s factory orders for December, scheduled to release in a few hours, will be on investors’ radar. Moreover, the US trade balance and JOLTs job openings, both for December, slated to release later in the day, will pique significant amount of investor attention.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

GCI Financial
GCI Financialhttp://www.gcitrading.com/
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