Euro below 1.09 awaiting big week

The Euro continues to languish below the 1.09 mark against the US dollar as we get ready to enter todays European trading session amid a light economic calendar on today, we don’t expect there to be much in the way of recovery but further on in the week however may be a different story

The US dollar was able to take advantage of solid economic data last week such as upbeat US second-tier manufacturing activity numbers, Retail Sales and wage growth which allowed the US Dollar to remain firmer for the fifth consecutive week. This was also backed up by the hawkish Fed Minutes where it was noted that further interest rate hikes were definitely not off the table and that most policymakers preferred supporting the battle again the ‘sticky’ inflation, despite being divided on the imminent rate hike.

News out last week from the Eurozone showed Gross Domestic Product (GDP) for the second quarter coming in at 0.3% and 0.6 percent YoY, matching expectations. Meanwhile, Eurozone Industrial Production for June MoM improved to 0.5 percent versus -0.1 percent market consensus and 0.0 percent prior. The monthly Industrial Output data rose by 0.5 percent versus analysts expectations for a figure of a 0.1 percent decline. Finally, the annual Harmonized Index of Consumer Prices for July came in at 5.3% percent versus 5.5 percent prior while the core figure remained at 5.5 percent, as expected.

The easing Eurozone inflationary pressure, according to data released by Eurostat on Friday, alleviates pressure on the European Central Bank to continue raising interest rates which led to the weakness in the Euro against the US dollar as this will cause the currency to fall further behind the greenback in terms of yield.

Looking further ahead today, and as already mentioned, there is not much movement expected in the Euro/USD currency pair today due to the lack of economic data but the news to watch out for later in the week will be the manufacturing PMI figures and consumer confidence numbers from the Eurozone.

From the US market participants will await the release of existing home sales figures, global manufacturing numbers and the all important Kansas Fed’s annual event for central bankers, namely the Jackson Hole Symposium, which will be watched for monetary policy clues.