EUR/USD remains tender despite good GDP data in the euro zone

The euro (EUR) is trading lower on Friday and at the time of writing is hovering around 1.1915, with support around 1.1900. Better-than-expected Gross Domestic Product data in Germany and the euro zone did not provide significant support for the currency pair, which remains on the defensive due to the stronger US dollar (USD).

US President Donald Trump is expected to reveal the name of the person who will replace Jerome Powell as Fed head, and the media point to former Fed governor Kevin Warsh. This news was welcomed by the market, which sees Warsh as a guarantee that the central bank will maintain its independence in the face of unprecedented political pressure.

Additionally, the news that Democrats and Republicans in the US Senate have reached an agreement on a package of budget bills has boosted hopes that another government shutdown will be avoided, providing additional support for the US dollar.

US macroeconomic data released on Thursday were mixed. Factory orders rose above forecasts, but jobless claims were also higher than expected and the trade deficit widened. On Friday, the European session will focus on preliminary data on gross domestic product (GDP) for the fourth quarter in the euro zone and the German Harmonized Index of Consumer Prices (HICP). Next, everyone’s attention will focus on the US Producer Price Index (PPI) data for December.

Price in euro today

The table below shows the current percentage change of the euro (EUR) against the main listed currencies. The euro was strongest against the Australian dollar.

	USD	EUR	GBP	JPY	BOOR	AUD	NZD	CHF
USD		0.40%	0.44%	0.66%	0.37%	0.70%	0.44%	0.41%
EUR	-0.40%		0.03%	0.26%	-0.03%	0.30%	0.04%	0.00%
GBP	-0.44%	-0.03%		0.23%	-0.06%	0.27%	0.01%	-0.03%
JPY	-0.66%	-0.26%	-0.23%		-0.29%	0.03%	-0.23%	-0.26%
BOOR	-0.37%	0.03%	0.06%	0.29%		0.32%	0.06%	0.04%
AUD	-0.70%	-0.30%	-0.27%	-0.03%	-0.32%		-0.26%	-0.31%
NZD	-0.44%	-0.04%	-0.01%	0.23%	-0.06%	0.26%		-0.04%
CHF	-0.41%	-0.01%	0.03%	0.26%	-0.04%	0.31%	0.04%

The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select Euro from the left column and move along the horizontal line to US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Daily Digest Market Changes: Warsha’s Name Reassures Markets

The US dollar is recouping some of the losses recorded over the past two weeks after Kevin Warsh emerged as the next Fed chairman, reassuring investors concerned about the central bank’s autonomy. Apart from that, there is hope that an agreement to avoid an immediate suspension of operations in the US is still possible, and profit-taking ahead of the weekend helped to oxygenate the weakened US dollar.
In Europe, the recent euro rally is starting to raise concerns about the competitiveness of European products in foreign markets and the growing risk of worsening inflation, which has prompted the first calls for interest rate cuts since last summer. If more European Central Bank (ECB) officials follow this path, we could see a deeper correction of the euro.
Data for the euro zone published earlier on Friday showed that the region’s economy grew at a steady pace of 0.3% and 1.4% year-on-year in the fourth quarter, compared to the market consensus, which predicted a slowdown to 0.2% and 1.2%, respectively.
Earlier, preliminary German GDP data showed that economic growth accelerated to 0.3% in the fourth quarter from a flat reading in the previous quarter, exceeding expectations of a 0.2% improvement. Year-on-year, the German economy grew by 0.4% from 0.3% in the third quarter.
Later in the day, the flash German HICP is expected to fall by 0.2% in January, after rising by 0.2% in the previous month, although annual inflation remains steady at 2%.
In the US, producer price index (PPI) data for December is forecast to decline to 2.7% year-on-year from 3% the previous month, while core PPI is forecast to decline to 2.9% year-on-year from 3% the previous month.

Technical analysis: EUR/USD corrects downwards, with support at 1.1900 under pressure

The EUR/USD rally has lost momentum as lower highs over the last two days suggest that sellers are taking control, although support at 1.1895 limits losses for now. Technical indicators point to increasing bearish momentum. The moving average convergence divergence (MACD) histogram has dropped below zero on the 4-hour chart and the red bars are expanding while the relative strength index (RSI) is trying to break the key level of 50 on the same time frame.

Confirmation below the mentioned 1.1895 area (Jan 28 lows) increases the negative pressure towards the Jan 27 low at 1.1850 and the Jan 23 low near 1.1730. On the positive side, resistances are at the January 29 high, near the psychological level of 1.2000, and the January 27 high at 1.2082.

(The technical analysis for this story was written with the lend a hand of an AI tool.)

Economic indicator

Gross Domestic Product sa (quarter/quarter)

Gross Domestic Product (GDP), published by Eurostat on a quarterly basis, it is a measure of the total value of all goods and services produced in the euro area over a specific period. GDP and its main aggregates are among the most significant indicators of the condition of any economy. The QoQ reading compares economic activity in a reference quarter with the previous quarter. Overall, an boost in this indicator is bullish for the euro (EUR), while a low reading is seen as bearish.

Economic indicator

Gross Domestic Product sa (y/y)

Gross Domestic Product (GDP), published by Eurostat on a quarterly basis, it is a measure of the total value of all goods and services produced in the euro area over a specific period. GDP and its main aggregates are among the most significant indicators of the condition of any economy. The y/y reading compares economic activity in the reference quarter with the same quarter a year earlier. Overall, an boost in this indicator is bullish for the euro (EUR), while a low reading is seen as bearish.