The euro is almost unchanged in the Tuesday session, as EUR/USD trades at 1.0450. There are no European releases until Thursday. In the US, today’s highlight is CB Consumer Confidence, with the indicator expected to climb to 108.9 points. On Wednesday, the US releases Pending Home Sales, with the markets anticipating a strong gain of 0.6%.
The week between Christmas and New Year’s tends to be subdued on the markets, but on the European banking front, things are anything but calm. On Friday, the Italian government agreed to bail out Monte dei Paschi (MI:BMPS), one of Italy’s largest banks, after the bank failed to raise EUR 5 billion from investors. However, the ECB has now said that the capital shortfall is much higher, to the tune of EUR 8.8 billion.
The ECB tried to calm down nervous markets, saying that the bank remains solvent, while acknowledging that the bank’s liquidity position had rapidly deteriorated. The European banking sector remains vulnerable, as underscored by Deutsche Bank’s recent troubles. If investor confidence in the banking sector weakens, the euro could lose ground.
The US economy continues to expand at a brisk clip, as underscored by the most recent revision to third quarter GDP. The Final GDP reading of 3.5% beat the estimate of 3.2%. This figure marked an upward revision of the previous GDP estimate of 3.2%. The stellar reading can be attributed to stronger consumer spending and an increase in business investment, and marked the strongest growth rate since the third quarter of 2015.
Government Steps in to Save Monte dei Paschi
US indicators ended the week on a high note. New Home Sales jumped to 592 thousand, which translated into an increase of 5.2%. This easily beat the forecast of 575 thousand. There was more good news from UoM Consumer Sentiment, which climbed to a 12-year high, with a reading of 93.8 points. The indicator was sharply higher than the previous reading of 93.2 points. The survey found that consumers are optimistic that the economy will continue to improve under Donald Trump. The president-elect has said he will cut taxes while increasing fiscal spending in order to pay for massive infrastructure improvements. The survey also noted that consumers expect economic growth to create new jobs and raise incomes.
Tuesday (December 27)
- 14:00 US S&P/CS Composite-20 HPI. Estimate 5.0%
- 15:00 US CB Consumer Confidence. Estimate 108.9
- 15:00 US Richmond Manufacturing Index. Estimate 5 points
Wednesday (December 28)
- 15:00 US Pending Home Sales. Estimate 0.6%
*All release times are GMT
* Key events are in bold
EUR/USD for Tuesday, December 27, 2016
EUR/USD December 27 at 10:00 GMT
Open: 1.0426 High: 1.0456 Low: 1.0425 Close: 1.0451
- EUR/USD posted small gains in the Asian session and is flat in the European session
- 1.0414 is providing support
- 1.0506 is the next resistance line
Further levels in both directions:
- Below: 1.0414, 1.0287, 1.0170 and 1.0028
- Above: 1.0506, 1.0616 and 1.0708
- Current range: 1.0414 to 1.0506
OANDA’s Open Positions Ratio
EUR/USD ratio remains unchanged this week. Currently, long positions have a majority (57%), indicative of trader bias towards EUR/USD continuing to move upwards.