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Mixed US Fundamentals Don’t Alter EUR/USD Course

January 3, 2020 by

The EUR/USD currency pair declined through the first half of the day today, then rose during the first hours of the US session and entered a downward trend afterwards. The US dollar trading seemed to be more affected by the global geopolitical news, especially those concerning Iran, than by its own fundamental indicators.

ISM manufacturing PMI unexpectedly went down from 48.1 to 47.2 in December. The median forecast was for the growth to 49.0. The fall of this leading indicator signals a continued weakness of the US manufacturing sector. (Event A on the chart.)

US construction spending increased by 0.6% in November after adding 0.1% a month earlier (revised from a 0.8% decline). The gain was also better than the average forecast of 0.4%. (Event A on the chart.)

Crude oil inventories showed a significant decline last week — by 11.5 million barrels. This exceeds both the expected drop of 3.5 million barrels and the decrease by 5.5 million barrels registered a week earlier. Total motor gasoline inventories increased by 3.2 million barrels during the period. (Event B on the chart.)

December FOMC meeting minutes have been released today, showing that the Fed Governors stopped viewing uncertainty as a major risk to their economic outlook and that they are still worried with the inflation running persistently below their target 2%: (Event C on the chart.)

Participants generally expressed concerns regarding inflation continuing to fall short of 2 percent. Al­though a number of participants noted that some of the factors currently holding down inflation were likely to prove transitory, various participants were concerned that indicators were suggesting that the level of longer-term inflation expectations was too low.

EUR/USD as of 2020-01-03

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