Neutral Data Cools Some Hot Heads


After a landslide decline on the EUR/USD yesterday the dollar bulls were in a full attack mode today as well, hoping that weaker inflation data and possibly stronger US GDP report could send the pair even lower. While the pair might some downside left it was a retreat time today.

The US Q3GDP report was slightly weaker than the consensus but the difference was trivial. Importantly private consumption remained strong, rising by more than 3% for the 5th quarter in a row - just enough for the Fed to believe that the US consumer may withstand a hike later this year. Jobless claims remained low, signalling that the payrolls report next week might be much better than last month.

Having that said, the data from Europe was actually slightly upbeat. While inflation in Spain was on a weak side (HICP in line, CPI lower than expected) in Germany all measures of inflation were 0.1-0,2 above the consensus - not a massive turnaround and certainly not something that may discourage the ECB from easing, but still good enough to cut some sellers out of the market. Sellers like the BNP that saw 1.09 as a mid-term bottom on the pair. There are, however, banks that still see a downside on the pair, like the BofA.

While the Fed could have been the biggest market event this week, we still have the BoJ tomorrow. Odds for easing have declined following a strong output numbers today but you never say never, especially when it comes to monetary easing these days.