EUR/USD – Euro Yawns As Markets Start Week With US Holiday

Fundamental analysis of Forex market

EUR/USD has ticked higher in the Monday session. Currently, the pair is trading at 1.1308, up 0.12% on the day. It’s a quiet day on the release front. There are no data events out of the eurozone. In the U.S., banks are closed for a holiday, so there are no U.S. indicators until Tuesday. Traders can expect a quiet session on Monday. On Tuesday, German ZEW economic sentiment, which has been in deep freeze for months, is expected to improve to -14.1 points.

Economic activity in the eurozone remains weak, which has weighing on the euro. EUR/USD dipped to 1.1249 on Thursday, its lowest level since mid-November. On Thursday, Germany and the eurozone released fourth-quarter GDP data, and the numbers were a disappointment. German Preliminary GDP was flat at 0.0%, after a decline of 0.2% in the third quarter. The eurozone’s largest economy managed to avoid a technical recession, which is two consecutive declines in quarterly growth. Germany’s manufacturing industry is limping, with factory orders and industry production posting declines in December. Eurozone Flash GDP remained stuck at 0.2%, shy of the forecast of 0.3%. On an annualized basis, fourth quarter growth was 0.9% in Germany and 1.2% in eurozone, both weaker than the third quarter numbers. If eurozone and German data continues to sag, traders can expect the euro to lose ground in the near term.

Is the U.S. economy slowing down? There are concerns about the strength of the economy, after soft consumer data in January. Retail sales and core retail sales showed sharp contraction, and these numbers came on the heels of soft inflation indicators. Inflation remains low, despite a strong labor market. CPI showed no change in January and has failed to post a gain since November. Core CPI has recorded weak gains of 0.2% for four successive months. On an annualized basis, CPI gained 1.6% in January, the weakest year-over-year gain since mid-2017. The soft inflation numbers were a result of low energy prices, which fell 3.1% in January as oil prices remain under pressure.

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