EUR/USD Sees Red as US Economic Indicators Overshadow the ECB

It was a big day for the EUR/USD. While economic data was on the lighter side, the ECB delivered its heavily anticipated October monetary policy decision and press conference.

Ahead of the ECB announcement, consumer confidence figures from Germany and Italy sent mixed signals. For November, Germany’s GfK Consumer Climate Indicator increased from -42.8 to -41.9. In contrast, Italy’s consumer confidence index fell from 94.8 to 90.1.

However, the stats had a muted impact on the EUR/USD, with the markets awaiting the ECB. On Wednesday, the Bank of Canada came up short of market expectations, with a 50-basis point rate hike. With the markets betting on a December Fed pivot, the door was open for the ECB to disappoint.

Ahead of the policy decision, the EUR/USD rose to an early high of $1.00936 before falling to a low of $1.00294.

In line with market expectations and forward guidance, the ECB raised interest rates by 75 basis points to 2.00% and the Deposit Facility Rate from 0.75% to 1.50%, shifting the market focus to the all-important ECB President Lagarde Press Conference.

One key takeaway from the ECB press conference was a non-committal ECB, with Lagarde talking about having to wait until December to have a set of data to assist with projections for growth and inflation.

US economic indicators stole the show, leaving ECB President Christine Lagarde to play second fiddle to the US economic calendar.

In Q3, the US economy expanded by 2.6% versus a 0.6% contraction in Q2. Economists forecast the economy to grow by 2.4%. The better-than-expected numbers could give the Fed more wriggle room to front-load rate hikes before taking its foot off the gas.

Following today’s US stats and the ECB press conference, the probability of a 75-basis point Fed rate hike in November stood at 90.8% and 30.6% in December.

EUR/USD Price Action

At the time of writing, the EUR was down 0.67% to $1.00127. In response to the US GDP numbers and the ECB press conference, the EUR/USD fell to a low of $0.99723.

The EUR/USD tested support at the First Major Support Level (S1) at $0.9986 before returning to parity.