Euro trades at an 18-month low as Eurozone growth and US prices data approach

• An 18-month low follows EUR/USD’s slide through its October floor.
• The prospect of a larger December Fed rate rise widens the divergence with the ECB.
• Friday brings Eurozone growth and employment data ahead of US producer prices.

From close to 1.1200 at Monday’s close, EUR/USD has slipped to around 1.1050, having touched a session low just below that level. Three consecutive daily declines have left the Euro at an 18-month low, with the US side of the pair driving the break lower. Wednesday marked the first daily close beneath the pair’s October lows.

US inflation exceeded forecasts on November 10, when Fed Governor Waller said a half-point increase should be considered for December 9. Futures assign roughly nine chances in ten to a quarter-point rise, with the remaining probability attached to a half-point move. Thursday’s jobless claims, at 200K versus expectations of 195K, left that pricing unchanged. With the European Central Bank (ECB) deposit rate at 2.50% and the Fed’s rate at 3.75%-4.00%, any shift towards a larger increase extends an interest-rate gap already at least 1.25 percentage points wide.

Reports from Iranian state media of an attack on Sirik in southern Iran also lifted Crude Oil on Thursday, pushing Brent more than 3% higher. Nearly all the Eurozone’s Crude Oil is imported and paid for in Dollars. Alongside that move, the Dollar Index hit an 18-month high; the Euro’s decline accounts for most of the index’s advance since August.

Eurozone and US data set the calendar

Friday’s schedule begins with a speech by ECB Executive Board member Schnabel at 07:10 GMT, ahead of third-quarter Eurozone growth data at 10:00 GMT. Forecasts point to unchanged growth of 0.4% quarter on quarter and 1.3% year on year, alongside a 0.2% employment increase following 0.1%. The final October inflation reading follows at 10:00 GMT on Wednesday, 18 November. All these releases precede the ECB’s December decision.

At 13:30 GMT on Friday, US producer prices are expected to show a monthly rise of 0.4%, down from 1.3%, and an annual increase of 6.6%, up from 6.3%. Tuesday, 17 November brings retail sales at 13:30 GMT, with no change forecast following growth of 0.8%. Both reports will inform the size of the Fed’s December rate move.

EUR/USD remains below its former trading range

Thursday’s high reached the lower edge of the 1.1100-1.1300 range that had contained the pair since 2 October, but failed to regain it. EUR/USD has now lost about 5.5% from its late-August peak just above 1.1700. The latest low is below every earlier bar on the chart, which begins in mid-July.

Daily EUR/USD chart