EUR/USD Forecast 13 Aug 19

The EUR/USD is currently ranging between the channel of 1.117 to 1.123.

The German ZEW Economic Sentiment came out much worse than expected. It was reported to be -44.1 instead of -27.8, almost double the estimate. As a survey of analysts, this sentiment report holds a weight. Their sentiments may be derived from their working knowledge of the economy and hence may be an early indicator of economic health. ZEW President Professor Achim Wambach mentioned that the data¬†points to a significant deterioration in the outlook for the German economy. The geo political challenges such as the US and China trade dispute and the Brexit negotiations probably added to the strain on Germany’s economy.

The plot of the German ZEW Economic Sentiment releases over time above suggests a deteriorating picture.

Interestingly, the euro currency seems to be shrugging this off for now as the EUR/USD ranges. Having said so, with the opening of the US market and the flood of liquidity, we may see increased price action. Traders may be waiting to see the release of the US Consumer Price Index before drawing a conclusion. It is due shortly. Consumer Price Index is important because the price of consumer goods is a significant component of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation. Speculations of a possible interest rate hike may generate demand for the currency.

There are still numerous economic releases due such as the German Preliminary Gross domestic product and US Retail Sales. As always, it is crucial to monitor the developments.

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