The euro remained range bound against the greenback on Friday following the release of weak economic data from both the US and the Eurozone. While the Italian trade balance unexpectedly turned into a deficit in January, the US consumer sentiment declined for the first time in March. Overall, the EUR/USD pair traded between 1.0605 and 1.0685.
The Italian National Institute of Statistics (ISTAT) reported that the country’s trade balance has turned to a deficit of €4.19 billion in January following a trade surplus of €1.36 billion in December, which disappointed economists who were expecting an increase in the trade surplus to €1.50 billion.
Excluding energy, Italy posted a trade surplus of €3.57 billion. Import prices fell by 3.50% m-o-m in January. On a y-o-y basis, import prices rose by 4.60% in January.
While exports grew by 0.20% m-o-m in January, imports fell by 3.20% in the same period. On a y-o-y basis, exports and imports increased by 15.30% and 8.40%, respectively, in January 2023.
The Eurozone’s inflation rate stood at 8.50% y-o-y in February, down from 8.60% in the previous month and in line with economists’ estimates. In the similar period last year, the Eurozone inflation rate was 5.90%.
Food, alcohol, and tobacco recorded an increase of 3.10% in February. Services rose by 2.02%. While non-energy industrial goods grew by 1.74%, energy increased by 1.64%.
Excluding energy, food, alcohol, and tobacco, the core consumer price index rose to 5.60% in February from 5.30% in the previous month, which matched the forecast of economists.
According to the US Federal Reserve, the country’s capacity utilization rate was 78% in February, a two-year low that was unchanged from the previous month and missed forecasts of 78.50%. The reported figure is also 1.60% lower than the long-term average. The capacity utilization rate for manufacturing inched down by 0.10% to 77.60%. Likewise, the capacity utilization rate for mining declined by 0.60% to 87.30%. However, the capacity utilization rate for utilities rose by 0.20% to 66.90%.
According to the US Federal Reserve, the country’s industrial production remained unaltered in February following an increase of 0.30% in January and missing forecasts of 0.20% growth.
Manufacturing output inched up 0.10% in February, compared with forecasts of a 0.10% decline. Also, the durable and nondurable manufacturing indexes inched up 0.10% and 0.20%, respectively. On the contrary, mining output declined by 0.60%. However, the utility output rose by 0.50%.
According to the preliminary data published by the University of Michigan, the consumer sentiment index declined to 63.40 in March from 67 in February. Economists had anticipated only a slight decline in the consumer sentiment index to 66.90. The reported figure represents the first decline in four months. However, the reading is 7% higher compared with a similar period last year.
The currency economic conditions index fell to 66.40 in March from 70.70 in February. Likewise, the index of consumer expectations decreased to 61.50 in March from 64.70 in February.
The weak economic data from both the US and Europe is expected to keep the EUR/USD pair range bound in the short term.
The historical price chart indicates that the EUR/USD pair is rising after testing the support at 1.0530. The next resistance is anticipated only near 1.0760. Additionally, the currency pair is trading above its 50-day moving average while the stochastic indicator is in the bullish zone. Therefore, we anticipate the EUR/USD pair to remain in an uptrend 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.
