For almost six months now, the euro has returned to its usual environment of recent years, characterised by low euro movement. When we observe movements in EUR/USD, almost all of them originate from the US Dollar (USD). This is in contrast to the spring, when the German fiscal package and the turmoil in the US also led to the euro appreciating. Not even the US shutdown changed this, Commerzbank's FX analyst Michael Pfister notes.

Euro moves still driven almost entirely by USD

"At first glance, things could look different this week. The US is releasing second-tier data once again (the November labour market report has been postponed), and Fed officials are entering the blackout period ahead of next week's meeting. Jerome Powell is expected to speak on a panel again, but it is unlikely he will announce anything surprising so close to the meeting."

"Meanwhile, the euro area will release its first estimate for November inflation tomorrow. The only question is whether we can expect a significant reaction from the euro to the figures. As we have often emphasised, in the days leading up to the euro area figures, a large proportion of national figures are released, which can be aggregated with a little effort. This month, for example, we received the major figures from Germany, France, Italy and Spain on Friday. With the figures from the Netherlands due to be published tomorrow morning, well over 80% of the data will likely be available by then, so there is little potential for surprises."

"Although our economists expect a slight year-on-year increase in both the headline and core rates, this is unlikely to change the general mood significantly. In short, even with new data, there is currently little reason to reassess the situation in the euro area, and therefore little reason to let the euro move in one direction or the other. For larger movements in EUR/USD, we must therefore continue to focus on the US dollar for the time being."