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MENAFN- Daily Forex)
- The euro rose slightly above $1.0860 after unexpectedly strong growth figures from the eurozone, prompting investors to reduce their expectations for a rate cut by the European Central Bank.
- According to the economic calendar results, the eurozone economy expanded by 0.4% quarter-on-quarter in the third quarter, double the second-quarter growth and beating market expectations of 0.2%.
- Germany surprised by avoiding recession and achieving a growth rate of 0.2%, while France and Spain also reported stronger-than-expected growth.
However, Italy's economy stalled. This week, inflation figures were also in focus, with eurozone inflation expected to rise slightly to 1.9%. Traders still expect the European Central Bank to cut its main deposit rate by 25 basis points in December, which would be the fourth cut after cuts in October, September and June. However, the likelihood of a more significant 50 basis point cut has decreased to around 25% in light of the GDP reports.
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On another note, according to the results of the economic diary, the eurozone industrial sector sentiment has fallen to its lowest level in more than two years. According to the announcement, the eurozone industrial confidence index deteriorated to -13 in October 2024 from a revised -11 in the previous month, which is below market expectations of -10.5, indicating the highest level of pessimism in the industry since the direct repercussions of the Russian invasion of Ukraine in July 2022.
Sentiments deteriorated for production expectations (0.2 versus 1.9 in September) and order books (-28.2 versus -25.6), which is in line with the decline in orders from foreign markets (-30.4 versus -26.9). In addition, pessimism rose for employment expectations (-5.6 versus -4.7), and selling price expectations rose to a three-month high (6.5 versus 6.3).
Meanwhile, economic sentiment in the eurozone fell to its lowest level in 8 months. The Eurozone Economic Sentiment Index (ESI) fell to 95.6 in October 2024 from an upwardly revised 96.3 the previous month, the lowest level since February and missing market expectations that it would remain at 96.3. The decline was largely due to increased pessimism in industry (-13 vs. -11 in September), the highest level in more than two years, amid declines in both output and order book levels. Meanwhile, the survey pointed to a rebound in consumer inflation expectations (13.3 vs. 11), rising to their highest level since February, potentially jeopardizing the progress in reducing inflation from the ECB's tightening cycle. On the other hand, the positive trends were captured by stronger-than-expected results for the services sector (7.1 vs. 7.1).
On the US side, the US Bureau of Economic Analysis reported a 2.8% increase in real GDP for the third quarter of 2024, a slight decline from the 3.0% growth seen in the previous quarter and below market expectations. GDP growth was largely driven by higher consumer spending, exports, and federal government spending. However, higher imports also had an impact on the overall GDP calculation. Consumer spending increased on both products and services, particularly non-durable goods such as prescription drugs, automobiles, health care services, and food.
Exports also expanded, especially in capital goods, while federal spending increased significantly in defence-related areas. Clearly, the slowdown in GDP growth during the third quarter can be attributed to lower private inventory investment and residential fixed investment. However, this was offset by gains in exports, consumer spending, and government spending, despite higher imports. GDP in current dollars also rose by 4.7% to $29.35 trillion in the third quarter/USD Technical analysis and forecast:
Despite attempts to rebound higher, they are still weak, and the general trend for the EUR/USD price will remain bearish as long as it stabilizes around and below the psychological support level of 1.0800. technically, the trend will remain bearish until the markets react to important announcements today.
EURUSD Chart by TradingView
Eurozone inflation figures will be announced, followed by the US inflation reading preferred by the US Federal Reserve. On the other hand, according to the performance on the daily chart, there will be no breach of the downtrend without stability above the psychological level of 1.1000.
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