The Eurodollar remained range-bound against the greenback following the weak economic data report from both the US and Europe. While the French industrial production data missed estimates, the US’s core consumer price index data was also weak. That kept the EUR/USD pair bound between 1.2100 and 1.2125.
According to the National Institute of Statistics and Economic Studies (INSEE), French industrial production declined 0.8% m-o-m in December, following a contraction of 0.7% in the earlier month and missed the 0.4% growth anticipated by economists.
For the first time since April 2020, manufacturing output declined 1.7% in December 2020, following an increase of 0.7% in November. As a whole, for the second month in a row, the industry recorded a decline of 0.8% in December, following a drop of 0.7% in the earlier month. Also, manufacturing output remains 5.7% lower than in February 2020. Likewise, the entire industry output stays -4.9% below the pre-pandemic February level.
Manufacturing output of coke and refined petroleum plunged 30.5% in December, following a 1.7% drop in November. Similarly, machinery and equipment goods posted a decline of 3.5% in December, compared with a rise of 1.2% in the previous month. While mining and quarrying, energy and water supply recorded a 4.3% rise in December, food products and beverages declined 1.8% during the same period.
Compared with the fourth quarter of 2019, the manufacturing industry posted a decline of 4.4% in December 2020.
According to the data published by the US Bureau of Labor Statistics, the consumer price index increased 0.3% m-o-m in January, compared with a 0.4% growth in the prior month. The reported CPI rise was in line with economists’ estimates. The food index rose by 0.1% in January. Likewise, the shelter index grew by 0.1%. The energy index increased 3.5% in January. The gasoline index rose by 7.4% in January. Also, the apparel index rose for the third successive month, gaining 2.2%.
Excluding volatile goods such as food and energy, the core consumer price index did not record any growth in January, following a 0.1% rise in the previous month, and missed the 0.2% increase anticipated by economists.
For the year ending January, the all items index increased 1.4%, reflecting the same growth in the earlier month. Excluding food and energy, the index for all items increased 1.4% in the 12 months ending January.
According to the Commerce Department, the US wholesale inventories increased 0.3% m-o-m in December, following an increase of 0.1% in the prior month. The reported figure was higher than the 0.1% rise anticipated by economists. An increase in inventories is considered detrimental to the US dollar.
Notably, the aspect of wholesale inventories used for computing GDP rose by 0.7% in December. Inventories decreased 1.6% y-o-y in December. The US economy expanded at an annual pace of 4% in 4Q 2020, following a record 33.4% rise in 3Q 2020. Inventories facilitated GDP growth for two consecutive quarters.
Businesses are rebuilding inventories after they were quickly used up in the early stage of pandemic. That enabled manufacturing to record growth despite a slowdown in consumer spending.
Wholesale stocks of motor vehicles and parts plunged 3.3%. Sales at wholesalers jumped 1.2% in December, following a growth of 0.3% in November. Based on the sales rate recorded in December, it would just need 1.29 months to empty inventories, decreasing from 1.31 in November.
According to the data published by the Energy Information Administration, the US crude inventories declined 6.60 million barrels in the week ended February 5, 2021. In the prior week, inventories decreased by 1 million barrels. The report surpassed economists’ estimates calling for a drop in crude stockpiles by a mere 0.90 million barrels.
At the end of February 5, excluding strategic reserves, the US inventories stood at 469 million barrels, which is 2% higher than the five year average for the comparable period.
The weak economic data from both the US and Europe is anticipated to keep the EUR/USD pair range-bound in the near-term.
Technically, the EUR/USD pair is rising after testing support at 1.2070. The next resistance is anticipated only near 1.2170. The currency pair is trading above its 50-day moving average, while the stochastic oscillator is near the oversold region. Therefore, we are anticipating the currency 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.
