By Samer Hasn Market
Euro was able to record gains of about 0.16% today against the US dollar (EUR/USD) and reached the 1.10400 level at the peak of the highs at approximately 2:10 p.m. GMT, before returning to decline again. Shortly before that, the euro was under pressure to give up its gains with the announcement of a number of economic data from the US, which initially suggested that they would put negative pressure on the US dollar to decline. It did decline sharply at first before consolidating again and advancing against the euro.
The euro’s gains initially came with a weak core PCE reading, which coincided with higher-than-expected growth in core durable goods orders, which appears to have caused the US dollar and bond yields to subsequently rise.
The core Personal Consumer Expenditure (PCE) Price Index reading, which excludes food and energy prices, recorded a growth of 3.2% on an annual basis last November, which was below expectations of 3.3%, which also represents the slowest growth since April of the year 2021. On a monthly basis, the index recorded A growth of 0.1%, which was less than the expected 0.2%.
In addition to the core PCE numbers, which reinforced hopes that inflation was continuing on track, the higher-than-expected growth in orders for core durable goods also strengthened sentiment about the health of the economy and the possibility of achieving a soft landing in inflation. It recorded a growth of 0.5%, which was higher than the expected 0.2% and higher than the previous reading, which was a contraction of 0.3%.
While we witnessed the restoration of growth in orders for durable goods such as computers, communication equipment, electronic equipment, and non-defense capital goods, which growth was absent during the previous reading.
In bond markets, the rise in US Treasury yields put some pressure on the Euro to decline with today’s data announcement before they retreated again. The yield on ten-year Treasury bonds rose to 3.884% after falling to 3.848% previously, which is slightly close to the lowest levels since last July.
The euro’s gains today came despite the continued decline in Eurozone bond yields and their trend to record another week of sharp losses.
The yield on ten-year German Bunds fell to 1.950% today, which is slightly close to the lowest level since last March. Thus, Bund yields are set to close negative for the fourth week in a row, which also represents the lowest weekly close this year.