Markets gear up for FOMC Minutes
On the US Dollar side of the currency pair, the FOMC Minutes will be published later today with more insights into the central bank’s economic outlook and monetary policy stance. In December, the Federal Reserve tapped the brakes on accelerating interest rate hikes, but this is not expected to mean a loosening of monetary policy. Depending on the rhetoric contained in the Minutes, the USD might react.
The Fed relies on economic data to decide on interest rates and the developments in the manufacturing sector should be a cause for concern.
Health of the US manufacturing sector
The ISM Manufacturing Purchasing Managers Index (PMI) comes up later today and should provide a snapshot of the health of the US manufacturing sector.
The manufacturing PMI for December is seen at 48.5 compared with 49 in November, indicating a further contraction in this key sector. November’s figures showed the first decline in manufacturing output since May 2020, with an across-the-board slip in new orders, supplier deliveries, order backlog and employment.
If there is anything unexpected in the results, the USD currency crosses could be affected.
On Friday, a slew of data will be released with a possible impact on the EUR side of the world’s most traded currency pair.
EU inflation seen lower in December
Flash Inflation Rate figures for December are seen at 9.7 percent compared with 10.1 percent previously on a year-on-year basis; and 0.1 percent versus November’s minus 0.1 percent on a monthly basis. The flash core inflation reading is seen at 5 percent on an annual basis.
Retail sales declining
Retail sales in the EU declined by minus 1.8 percent on a monthly basis and minus 2.7 percent on a yearly basis in October as inflation weighed on spending and consumers might have been saving for Christmas shopping in November and December. The updated retail sales figures for November are expected at the level of 0.5 percent on a monthly basis and minus 3.3 percent on an annual basis.
The weakening scenario in October showed the biggest fall in trade since December 2021 with drops in the sales of non-food items, online shopping, drinks and tobacco.
EU consumer confidence slumping
The final reading for Consumer Confidence in December will be released on Friday and is seen at minus 22.2 compared with minus 23.9 previously.
Inflation headwinds might be calming down in the EU, but they’ve left a trail of damaged consumer confidence and an impact on the retail sector that will likely weigh on economic performance.
Will there be volatility in the EURUSD? Traders and investors should be aware of the nervous sentiment around global recession fears and factor it into their scenarios while staying updated with the latest developments.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.