- The Euro extends its recovery against the US Dollar on Monday, rebounding after touching 1.0224 last week.
- Investors weigh the potential effects of universal US tariffs amid political instability in Italy, Austria, and Canada.
- Market focus shifts to European PMI figures and Germany’s preliminary inflation data for December, set to be released later today.
The Euro extends its recovery into a second consecutive session, trading above 1.0400 on Monday, supported by reports that President-elect Donald Trump is considering implementing universal tariffs on critical imports. The Euro also gains strength from upbeat December Purchasing Managers Index (PMI) data, with Spanish, Italian, French, German, and broader Eurozone figures showing improvement from previous readings and exceeding expectations.
Political developments further contribute to the Euro’s rally. Italian Prime Minister Giorgia Meloni disrupted European unity by meeting with President-elect Trump at Mar-a-Lago, while Canadian Prime Minister Justin Trudeau is reportedly set to resign, according to Bloomberg News. Additionally, the Washington Post confirmed discussions about universal tariffs, adding to market volatility.
As the first full trading week of the year begins, financial markets are returning to full capacity. A packed economic calendar lies ahead, with the US Nonfarm Payrolls report on Friday serving as the week’s focal point for traders.
Daily Digest Market Movers: CPI Rises, PMIs Beat Expectations
- President-elect Donald Trump is reportedly considering universal tariffs on critical imports, as per The Washington Post.
- Spain’s HCOB Services PMI surged to 57.3, exceeding expectations of 54.1 and significantly higher than the previous 53.1 reading.
- Italy’s HCOB Services PMI climbed out of contraction territory, reaching 50.7, above the 50.0 estimate and up from the prior 49.2 figure.
- France’s HCOB Services PMI improved to 49.3, beating the forecast of 48.2 and up from 48.2 last month.
- Germany’s HCOB Services PMI advanced slightly to 51.6, surpassing both the forecast and the previous reading of 51.4.
- The German Consumer Price Index (CPI) showed a stronger-than-expected preliminary rise of 0.7% in December, compared to the expected 0.4% and the previous -0.2%. On a yearly basis, CPI increased to 2.9%, up from 2.4% in November.
- Later today, at 14:45 GMT, S&P Global will release the final US Services PMI for December, anticipated to remain steady at 58.5.
Technical Analysis: Euro rises 1% on the day
EUR/USD rebounds by 1% as traders cover short positions initiated before Christmas, recovering from last week’s drop to 1.0224. The oversold Relative Strength Index (RSI) indicates potential for a recovery, targeting 1.0400 or 1.0448 if supported by strong European data.
Key Levels to Watch:
Upside:
- Immediate resistance lies at the psychological 1.0400 mark.
- A break above could lead to the pivotal 1.0448 level, the low from October 3, 2023.
- Sustained momentum might see the pair challenge the 55-day Simple Moving Average (SMA) at 1.0565.
Downside:
- Initial support is at last week’s two-year low of 1.0224.
- Further weakness may test the pivotal 1.0200 level, signaling new two-year lows.
- A continued decline could target parity, with 1.0100 as the final key support before reaching the 1.0000 milestone.
