Market News & Analysis


Top Story

EUR/USD Through $1.10 Shrugging Off Upbeat Inflation

The selloff in the EUR/USD is gaining traction as the day progresses. After a slow start and a slew of eurozone data, the bears are in control.

Germany continue to throw out mixed readings. German retail sales declined -1.9% month on month in October, significantly worse than the 0.2% increase forecast. On the other hand, German unemployment unexpectedly fell in November by -16,000 compared to a rise of 5000 forecast. This was the biggest fall since February and shows that the labour market remains robust despite the slump in manufacturing.

EZ Inflation beats
Eurozone inflation was more encouraging beating expectations by climbing 1% higher year on year in October. Whilst this is still a good distance from the ECB’s 2% target it is a definite improvement on September’s 0.7% increase. Core inflation also surprised to the upside, increasing for the third straight month. 

The question is whether this increase in inflation can be sustained or even increased? Core inflation is on the up and wage growth is also rising so increased pressure on prices is possible. That said, businesses are lacking the confidence to put higher costs onto the consumer in any meaningful way. As a result, inflation could struggle to advance. Given the weakness in the euro investors are dubious of inflation picking up further.

The increase in inflation is good news for the ECB, which is growing increasingly concerned over the impact of its lose monetary policy. Still policy makers will want to see more evidence of increasing inflation before they take their foot off the easing pedal.

Levels to watch:
The EUR/USD trades below its 200, 100 and 50 sma – bearish signs. The pair broke through support at $1.10 and $1.0989 opening the door to $1.0940. Resistance can be seen at $1.1020, $1.1050 and $1.11.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.