The euro saw healthy gains in the markets on Thursday and into Friday after the US dollar slipped.
The release of the American consumer price index for September was largely disappointing. While analysts had been predicting a rise of 2.4%, the actual rise of 2.3% left many traders thinking twice about investing.
This is significantly lower than the rise of 2.7% it saw in August.
As a result of the problems, the euro managed to surge ahead and capture a chunk of the market. It closed at 1.1592 yesterday against the dollar, and over the period it rose by 0.49% – a strong performance for a currency beset by issues around Brexit, Italian budget problems and more.
Gains for the pair also persisted during the overnight Asian trading session, although rises were not quite as substantial there. By 3am GMT, the euro had reached a position of 1.1604, and it managed to trade 0.1% higher than the US dollar compared to yesterday’s closing levels.
However, it is possible that the euro could face threats to its dominance later in the day. Industrial production information for the Eurozone is due out alongside information about Germany’s consumer price index. If either of these are disappointing, the trend could be reversed.
Looking ahead to next week, there is plenty on the cards to keep the forex markets busy.
The ongoing wrangling between Italy and the EU on the subject of its budget will reach a climax on Monday when Italy’s deadline for submitting its 2019 budget to the EU occurs. The EU places a borrowing restriction of 2% of GDP on member states, but the Italian government is planning to ignore this and opt for a higher figure.
Developments around this in recent weeks have affected the value of the common currency – meaning that euro traders may want to pay extra attention.
There are lots of data releases due to come out of the US on Monday. Retail sales figures (excluding cars) for September are due out at 12.30pm GMT, and the month on month change is expected to hold static at 0.3%.
Later in the day, the New Zealand consumer price index for the third quarter of the year is due to come out. Analysts forecast that the quarter on quarter change will show a welcome rise from 0.4% to 0.7%.
Tuesday’s main event will be the minutes from the Reserve Bank of Australia’s most recent meeting, which will be out at 1.30am GMT.
At 8.30am GMT, the UK’s average earnings figures for August will come out. Analysts forecast a drop of 0.2% from the previous position of 2.6% to 2.4% now.
Political instability may be a risk into next week as well when the European Union’s leaders meet to talk about a possible UK withdrawal agreement. It is understood that the agreement is largely finalised on the EU side, although British Prime Minister Theresa May will need to convince her domestic Conservative Party colleagues to support any deal.