The EUR/USD currency pair faced significant pressure on November 14 due to the release of the Consumer Price Index (CPI) report in the USA. In October, the CPI decreased from 0.4% to 0% (m/m), and on an annual basis, it dropped from 3.7% to 3.2%. The Core CPI for the same period decreased from 4.1% to 4.0%. This led to a drop in the Dollar Index (DXY) from 105.75 to 103.84. Bank of America reported that this was the most significant dollar sell-off since the beginning of the year. This had a direct impact on the EUR/USD pair, which saw a bullish candle of almost 200 pips, reaching resistance at 1.0900.
The following week saw DXY consolidate near 103.80 while EUR/USD continued to move along the 1.0900 line. Market reassurance, along with Thanksgiving Day, was influenced by uncertainty about the Federal Reserve (FRS) and the European Central Bank (ECB). Expectations of a conclusion to the hawkish monetary policy of the FRS and a potential shift towards easing its monetary policy were contradicted by the minutes of the latest Federal Open Market Committee (FOMC) meeting.
Meanwhile, in Europe, the ECB protocols contradicted the subsequent rhetoric of individual leaders of the ECB. The future monetary policy of the ECB remained open for debate, with indicators of stagflation in the Eurozone’s economy. Germany’s economy, while showing some signs of improvement, is still facing challenges. For the second consecutive week, EUR/USD concluded near the 1.0900 level.
The upcoming week will see the release of preliminary inflation (CPI) data for Germany and GDP for the United States for Q3. It will also reveal the CPI and retail sales volumes for the Eurozone as a whole, the Personal Consumption Expenditures (PCE) Index and the number of initial jobless claims in the United States.
In the UK, recent macroeconomic data indicates that the economy is on the mend, leading to a strengthening of the British pound. Business activity in the country is rebounding, and there is speculation of another interest rate hike by the Bank of England (BoE). However, there is uncertainty about whether real actions, such as an interest rate hike, will follow the hawkish comments from BoE leaders.
