The eurodollar declined against the greenback yesterday following the weaker than anticipated Italian industrial production data report. The rising new strain based COVID-19 infections and global economic uncertainty also increased the greenback demand, which is regarded as a safe-haven currency. In the last 24 hours, the EUR/USD pair declined from a high of 1.2205 to a low of 1.2145.
Data published by the Federal Statistical Office (Destatis) indicates that the German wholesale price index (WPI) increased by a rate of 0.6% m-o-m in December, from 0.1% in the earlier month. Economists had anticipated December to record a growth of just 0.1%.
On a y-o-y basis, the wholesale price index fell 1.2% in December 2020. It is the third month of consecutive decline, with November and October recording a drop of 1.7% and 1.9%, respectively, on a y-o-y basis.
Italian industrial production declined 1.4% m-o-m in November, following a growth of 1.4% in October, as per data provided by Istat (Italian National Institute of Statistics). The reported figure was worse than the 0.4% drop anticipated by economists. The index reflects the change in volume of industrial production, barring the construction sector. On a y-o-y basis, the industrial production index (calendar adjusted) fell by 4.2% in November.
Despite the decrease in December, in the last three months, the industrial production rose by 2.1% compared with the previous three months.
According to Eurostat, the Eurozone industrial production grew 2.5% m-o-m in November, following an increase of 2.3% in the earlier month. Economists had anticipated the Eurozone industrial production to increase by a mere 0.2%.
Production of capital goods increased 7% m-o-m in November. Likewise, intermediate goods recorded a 1.5% growth. However, durable consumer goods declined by 1.2% in December. Non-durable consumer goods and energy recorded a decline of 1.7% and 3.9%, respectively.
On a y-o-y basis, industrial production fell 0.6% in November. The decline was led by a 5% drop in energy, a 2.5% decline in non-durable consumer goods, and a 0.4% fall in durable consumer goods. However, production of intermediate goods and capital goods increased 1.1% and 0.1%, respectively.
In the US, according to the Bureau of Labor Statistics, the consumer price index (CPI) increased 0.4% m-o-m in December, following an increase of 0.2% in the earlier month and more significant than the 0.4% growth anticipated by economists. On a y-o-y basis, the CPI increased by 1.4% in December 2020.
Barring volatile goods such as food and energy, the core consumer price index increased 0.1% m-o-m in December, following a rise of 0.2% in the prior month. The consensus estimate called for an increase of 0.1% for the reported period. On a y-o-y basis, the core CPI increased by 1.6% in December.
The increase in the all items index, excluding food and energy, was led by an 8.4% rise in the gasoline index, which contributed to over 60% of the overall increase. On a y-o-y basis, the core CPI increased by 1.6%.
The food index increased 0.4% m-o-m in December, following a 0.1% drop in the earlier month. On a y-o-y basis, the food index increased by 3.9% in December. The energy index declined 7% during the same period.
The energy index increased for the seventh consecutive month in December, rising 4%. Despite the monthly rise, the energy index declined 7% on a y-o-y basis. The mixed economic data is expected to keep the eurodollar range bound against the greenback.
The historical price chart indicates that the EUR/USD is declining after facing resistance at 1.2205. The next support is anticipated only near 1.2050. Additionally, the currency pair trades below its 50-day moving average, while the MACD indicator’s reading is negative. Therefore, we are anticipating the currency pair to remain in a downtrend in the short-term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
