EUR/USD: November inflation in Germany decreased by -0.2%
The EUR/USD pair shows a corrective movement, holding in the area of 1.0557. The main driver is the weakening of the US dollar, and market participants are preparing for another interest rate cut by the European Central Bank (ECB), which additionally supports the single currency.
According to the data, in November, the consumer price index in Germany showed a decrease from 0.4% to -0.2% on a monthly basis, which led to an increase in the value from 2.0% to 2.2% year-on-year, as expected by experts. The harmonized indicator according to EU standards was adjusted from 0.4% to -0.7%, maintaining the annual mark at 2.4%. The ECB meeting, which will be held on Thursday at 15:15 (GMT+2), may make additional changes: investors expect a rate cut from 3.40% to 3.15%.
The neutral behavior of the dollar, which remains near the 106.00 mark in the USDX index, has an additional impact on the dynamics of the pair. Markets are waiting for tomorrow's data on inflation in the United States, which will form the basis for further decisions by the Fed at its meeting on December 18. According to forecasts, the consumer price index will grow by 0.2% on a monthly basis and from 2.6% to 2.7% on an annual basis, while the base indicator will remain at 3.3%. These data may keep pressure on the regulator in favor of further easing of monetary policy, which fuels expectations for a rate cut of -25 basis points.
- Support levels: 1.0510, 1.0340.
- Resistance levels: 1.0600, 1.0710.
GBP/USD: the market expects the Bank of England rate to remain at 4.75%
In the Asian session, the GBP/USD pair continues to consolidate near the 1.2745 level, while trading volume remains low, as market participants assess the impact of the November employment report in the United States on the further dynamics of the asset.
Important macroeconomic statistics for October will be published in the UK on Friday at 09:00 (GMT+2). The country's gross domestic product (GDP) is expected to show an increase of 0.2% on a monthly basis after a decrease of 0.1% a month earlier. At the same time, experts predict an improvement in the situation in the industrial sector: output is likely to grow by 0.3% compared with a 0.5% drop in September, and in annual terms the indicator will increase by 0.2% against the previous decline of 1.8%.
Last week, the head of the Bank of England, Andrew Bailey, in an interview with The Financial Times, announced four possible interest rate cuts of 25 basis points if inflation continues to show a slowing trend. According to him, the decrease in price pressure is faster than the regulator's forecasts, but the October inflation statistics turned out to be higher than expected. The consumer price index rose from 1.7% to 2.3% in annual terms, with a forecast of 2.2%, and rose from 0.0% to 0.6% on a monthly basis. Core inflation has also changed: the annual rate accelerated from 3.2% to 3.3%, and the monthly rate increased from 0.1% to 0.4%. Despite this, the market is almost certain that at the meeting on December 19, the regulator will keep the current interest rate at 4.75%.
- Resistance levels: 1.2776, 1.2817, 1.2860, 1.2900.
- Support levels: 1.2730, 1.2700, 1.2650, 1.2600.
USD/CHF: bearish dynamics intensifies against the background of an expanding range
During morning trading, the USD/CHF pair shows a multidirectional dynamics, remaining near the 0.8775 mark. Market participants are waiting for key events that can set the further direction of the asset's movement.
On Thursday at 10:30 (GMT+2), investors' attention will be focused on the meeting of the Swiss National Bank (SNB). The interest rate is expected to decrease by 25 basis points to the level of 0.75%. Since the beginning of the year, the regulator has already adjusted the indicator three times, bringing it to 1.0%, but the head of the SNB, Martin Schlegel, allowed the possibility of a more significant decrease, including a transition to negative values, in order to weaken demand for the Swiss franc as a safe haven currency.
Meanwhile, the results of a survey conducted by Ernst & Young Global Ltd. Together with the Swiss Retail Federation, they showed that households on average plan to spend about 282 francs on Christmas shopping — similar to last year's values. However, more than half of the 753 respondents admitted that they would limit holiday spending due to rising prices for goods and services.
- Resistance levels: 0.8800, 0.8827, 0.8865, 0.8900.
- Support levels: 0.8776, 0.8758, 0.8730, 0.8700.
USD/CAD: the growth momentum of the US currency remains strong
The USD/CAD pair is showing steady strengthening, developing the bullish trend formed last week. Current trading is taking place around 1.4180, and the instrument is aiming for an upward breakout, updating the highs recorded in April 2020.
The growth of the US dollar is supported by the strong indicators of the US labor market for November, published on Friday. The country's economy added 227.0 thousand jobs outside the agricultural sector, significantly exceeding the previous result of 36.0 thousand and analysts' expectations of 200.0 thousand. The average hourly wage remained at 0.4% on a monthly basis and 4.0% on an annual basis, despite the projected decline. The unemployment rate increased from 4.1% to 4.2%, which was in line with expectations. These data reinforced expectations regarding the Fed's interest rate cut by 25 basis points at the next meeting on December 17-18. At the moment, the probability of such a scenario is estimated at more than 80.0%, according to the CME Group FedWatch Tool.
The key factor that can influence further dynamics will be the November statistics on inflation in the United States, scheduled for publication tomorrow at 15:30 (GMT+2). Analysts assume that the consumer price index will remain at 0.2% on a monthly basis, and will grow from 2.6% to 2.7% on an annual basis. The base values are likely to be fixed at 0.3% on a monthly basis and 3.3% on an annual basis, which may become an additional driver of the dollar's strengthening.
- Resistance levels: 1.4200, 1.4250, 1.4300, 1.4350.
- Support levels: 1.4145, 1.4100, 1.4050, 1.4000.