EUR/USD – Euro skids to 17-month low as U.S. producer inflation improves

EUR/USD has picked up where it left off last week and continues to lose ground. Currently, the pair is trading at 1.1264, down 0.53% on the day. On the release front, there are no major releases out of the eurozone or the United States. On Tuesday, Germany releases ZEW Economic Sentiment, with the markets braced for a poor reading of -24.2 points.

Inflation continues to rise higher in the United States. On Friday, the Producer Price Index (PPI) jumped 0.6%, its sharpest gain since January 2017. This easily beat the estimate of 0.2%. Core PPI was also sharp, with a gain of 0.5%, compared to a gain of 0.2%. Stronger inflation will reinforce expectations that the Fed will hike rates hike in December. Currently, the odds of a quarter-percent rate hike stands at 76%. On the consumer front, UoM consumer sentiment dropped to 98.3, down from 99.0 points. Still, this beat the forecast of 98.0 points.

The standoff between Italy and the EU over Italy’s budget could escalate this week. The EU Commission has demanded that Italy revise its budget by Tuesday, which it argues raises Italy’s debt and is in breach of EU fiscal rules. If Italy refuses to comply, the EU could impose financial sanctions on Rome. For its part, the Italian government says that the economic slowdown requires an expansionary budget. Italy has suggested that it will lower its GDP forecast, in order to meet the EU requirements. Italy is the third largest economy in the eurozone, and the financial markets and the euro could react negatively if Rome and Brussels cannot resolve the crisis.

European open – Brexit and Italy risks this week

US Dollar Flying High on Hawkish Fed Statement

EUR/USD Fundamentals

Monday (November 9)

• 4:00 Italian Industrial Production. Estimate -0.5%. Actual -0.2%
• Tentative – US Loan Officer Survey
• 14:30 US FOMC Member Mary Daly Speaks

Tuesday (November 10)

• 2:00 German Final CPI. Estimate 0.2%
• 5:00 German ZEW Economic Sentiment. Estimate -24.2
• 5:00 Eurozone ZEW Economic Sentiment. Estimate -17.3

*All release times are DST

*Key events are in bold

EUR/USD for Monday, November 12, 2018

EUR/USD for November 12 at 7:05 EST

Open: 1.1323 High: 1.1332 Low: 1.1240 Close: 1.1263

EUR/USD Technical

EUR/USD ticked lower in the Asian session and has posted considerable losses in European trade

• 1.1212 is providing support
• 1.1300 has switched to a resistance role after losses by EUR/USD on Monday
• Current range: 1.1212 to 1.1300

Further levels in both directions:

• Below: 1.1212, 1.1120 and 1.0992
• Above: 1.1300, 1.1434, 1.1553 and 1.1685

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