💥 Fed cuts sparks mid cap boom! ProPicks AI scores with 4 stocks +23% each. Get October’s update first.Pick Stocks with AI

EUR/USD moves lower amid Fischer's hawkish comments, weak euro zone GDP

Published 11/13/2015, 05:28 PM
Updated 11/13/2015, 05:34 PM
EUR/USD fell nearly 0.50% on Friday to end the week below 1.08
EUR/USD
-
DX
-

Investing.com -- EUR/USD fell considerably on Friday to close the week below 1.08, as hawkish comments from Federal Reserve vice chairman Stanley Fischer on the potential rebound of U.S. inflation increased the likelihood of an interest rate hike by the U.S. central bank next month.

Investors also reacted to sluggish euro zone GDP figures for the third quarter, which could expedite plans from the European Central Bank to ramp up its asset-purchasing program.

The currency pair traded between 1.0714 and 1.0817 on Friday before settling at 1.0764, down 0.0051 or 0.47% on the session. For the week, the euro remained relatively flat against the dollar after plunging 1.2% last Friday following a robust October U.S. jobs report. Over the last month, however, the euro has tumbled more than 5.25% amid indications of the potential divergence of monetary policies between the Fed and the ECB.

EUR/USD likely gained support at 1.0673, the low from November 10 and was met with resistance at 1.1496, the high from Oct. 15.

On Thursday evening after the close of trading, Fischer reiterated that long-term inflation will move back toward the Fed's long-term goal of 2%, as transitory effects from a strong dollar and low energy prices continue to recede. Earlier this week, the dollar soared to a seven-month high as currency traders reacted to last week's stellar U.S. jobs report from October. Crude futures, meanwhile, slumped to near six-and-a-half year lows in Friday's session amid further signs of a glut of oversupply on global energy markets. Inflation has remained below the Fed's long-term goal of 2% in every month over the last three years.

In September, the PCE Price Index inched up 0.2% on a yearly basis following a 0.3% gain a month earlier. The Core PCE Price Index, which strips out food and energy prices, rose by 1.3%, unchanged from August. The core index is the Fed's preferred gauge for long-term inflation.

"From the standpoint of the outlook, this transience means that some of the forces holding down inflation in 2015--particularly those due to a stronger dollar and lower energy prices--will begin to fade next year," Fischer said in a speech at the Fed's conference on Monetary Policy Implementation and Transmission in the Post-Crisis. "Consequently, overall PCE inflation is likely on this account alone to rebound next year to around 1-1/2 percent. And as long as inflation expectations remain well anchored, both core and overall inflation are likely to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate."

Elsewhere, U.S. retail sales in October ticked up by 0.1%, two-tenths under consensus estimates due in part to sharp declines in electronic & appliance purchases and grocery sales. Core sales, minus auto and gas prices, increased by 0.3% after a flat reading in September. Producer prices, meanwhile, tumbled 0.4%, amid continued declines in the services industry. Business inventories, however, rose by a stronger than expected 0.3% last month.

In Europe, GDP in the third quarter increased moderately by 0.3%, following a lackluster gain of 0.4% three months earlier. Analysts expected to see economic growth in the euro zone of 0.4% last quarter. Disappointing international trade data served as a drag on growth in Italy and Germany, while restraining further upward movement in France. One day after ECB president Mario Draghi sent strong hints that the Governing Council could expand its quantitative easing program when it meets next month, the downbeat data could provide additional pressure on the central bank to act.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, closed the week at 98.90, up 0.33% on the session.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.