The US dollar continues to attract investors especially after the Fed announced its intention to go on raising the key rate. What is more, the regulator is planning to keep the benchmark rate at high levels until inflation slackens to 2% per annum.
Meanwhile, today, Germany has published a bulk of macroeconomic information. Let us focus on the data from the eurozone's largest economy and traders’ reaction to it.
It is highly possible that in the near future, everyone will resume discussing the risk of a recession in Europe. In the fourth quarter of 2022, the largest eurozone economy contracted by 0.4%, according to the final data. The initial estimates unveiled a drop of 0.2%. This is the first decline in Germany’s economy in the last two years. High consumer prices, the energy crisis, the overall situation in the world, and supply disruptions have had a negative effect on economic growth.
Nevertheless, in Germany, consumers have become more optimistic. After a peak of pessimism recorded in October, people now hope that the country is able to avoid a recession. However, this factor has only a minor influence on consumer activity. The consumer climate indicator remains deep in the negative area – at the level of -30.5 points.
Traders are also showing weak reaction to the recent reports. The euro/dollar pair is still inching down. Every day, the euro losses a bit of its value against the US dollar. Notably, several months ago, the euro showed a rapid rise, adding about 1,500 pips. As a result, it entered the overbought area. That is why now, a downward correction is logical. The market sentiment is likely to remain the same until the end of the trading week. Analysts recommend that traders continue opening short orders with the targets at 1.0525 and 1.0498. The trend will change only if the price consolidates above 1.0742.
What is more, today, the US will disclose its consumer spending report. This may give a signal of future trends in the world’s largest economy. According to the forecasts, the data is expected to be positive.
The pound sterling also failed to return investment attractiveness. Today, the currency is testing the lower limit of the range after a long-lasting hovering within it. The pair may move towards the level of 1.1950. However, it is likely to continue trading within the sideways channel amid the news flow.
00:00 Introductory remarks
00:34 Germany's quarterly GDP growth
01:15 German Consumer Climate Index from Gfk
02:33 What's the impact of the expected release of the Consumer Spending Estimate
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