The barrier of 1,2000 at EUR/USD managed to stop the upward movement. The exchange rate has significantly reversed from this point, creating a larger correction of the entire U.S. dollar index. In addition to market factors such as the option barriers, macroeconomic data also seemed to help the USD.
The PMI index for the euro area was 51.7 pts and was at a level in line with market expectations. Meanwhile, consumer inflation fell by 0.2% in August, with prices rising by 0.4% in the previous month and a market consensus of 0.2%. Eurostat data show that the overall fall in prices in the euro area was mainly due to a fall in energy prices on an annual basis, which fell by almost 8%. This may therefore be a temporary situation and the following months may no longer lead to deflation.
In the afternoon, data from the USA appeared in the form of a publication on car sales and an ISM manufacturing report. The latter confirmed the rebound in this sector of the US economy, as ISM increased from 54.2 in July to 56 pts in August. The consensus was for a reading of 54.5 pts. The data confirms the economic recovery in the world's largest economy. Nevertheless, despite the current rebound of the US dollar from the two-year low, it should still be remembered that the Fed has changed its approach to inflation, which may prolong the period of low-interest rates in the US together with higher inflation. This may lead to a deepening of negative real interest rates, which in turn may put pressure on the dollar in the long run.
What else could affect the EUR/USD rate? The euro has also turned back from a two-year high after European Central Bank member Philip Lane said that the central bank does not focus on exchange rates, but that the euro/dollar exchange rate matters. This could be seen as a remark in relation to the strong appreciation of the euro in recent months and a very delicate verbal intervention. The corrective movement in the EUR/USD pair appears to be reinforced by the increase in the number of new coronavirus cases in France, Ireland and Spain.
A different view of the exchange rate seems to have been taken by the head of the Reserve Bank of New Zealand, Adrian Orr, who stated today that he does not care about the NZD rate. Thus, the NZD/USD continues the above-average upward trend and has reached the highest level in 14 months.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
