EUR/USD sparks higher after strong US CPI and EU industrial data

EUR/USD sparks higher after strong US CPI and EU industrial data
Written by:
Crispus Nyaga
12th August, 12:49
  • The EUR/USD pared back earlier losses as investors reacted to strong US inflation and EU industrial data.
  • The data showed that industrial production in the US rose by more than 9% in June.
  • In the US, the headline CPI rose by 1% while core CPI rose by 1.6%.

The EUR/USD is up slightly today as investors react to the relatively strong industrial production data from the Eurozone and the strong US inflation data. The pair is trading at 1.1773, which is slightly higher than the intraday low of 1.1700.

EUR/USD
EUR/USD spikes after strong CPI data

Eurozone industrial production rebounds

The Eurozone is making a strong recovery after plunging in March and April. Recent numbers, including employment, consumer inflation, retail sales, and manufacturing and services PMI have been in an upward trend.

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Today, data from Eurostat showed that industrial production has also bounced back. Industrial production increased by 9.1% in June after rising by 12.3% in May. This improvement was slightly worse than the 10% increase that analysts were expecting. On an annualised basis, the production declined by 12.3% in June, an improvement from the previous decline of 20.4%.

According to Eurostat, the largest decreases were registered in Portugal, Germany, and Spain, where the production fell by 14.8% and 14.1%, respectively. The only country to record an improvement was Ireland, where the production rose by 4.5%.

By sectors, the best-performing industries were capital goods, whose production rose by 14.2% and durable consumer goods where the production rose by 20.2%. Intermediate goods and energy increased by 6.7% and 2.6%, respectively.

As mentioned above, activity in the Eurozone has been doing better, which has led many to speculate about a V-shaped recovery. In a statement after the data, analysts at ING said:

“Even though it is unlikely that the V will be completed soon, recent survey data has been encouraging. Manufacturing businesses indicate that output has continued to recover in July and that new orders have also been returning quickly.”

US consumer inflation rises

The EUR/USD pair is also reacting to news from the US. Data released today showed that the mortgage price index rose from the previous 300.7 to 306.6. The mortgage market index has also increased from 798.8 to 852.8. Most importantly, the mortgage application increased by 6.8% after falling by 5.1% in the previous month. These numbers show that demand for houses and mortgages in the US is rising.

Another data from the Bureau of Labour Statistics showed that the headline CPI increased by 1%in July. This was better than the expected increase of 0.8% and the previous increase of 0.6%. The Core CPI, which excludes the volatile food and energy products increased by 0.6% after rising by 0.2% in the previous week. The data increased by 1.6% on an annualised basis.

While the inflation data is better than what analysts were expecting, it is still lower than the 2% target set by the Federal Reserve. These numbers came a day after the bureau released strong producer price index data.

EUR/USD technical outlook

EUR/USD

The EUR/USD pair rose today even after the better than expected inflation data from the US. On the daily chart, the price is still above the 50-day and 100-day exponential moving averages. The price has also topped as shown by the pink rectangle. Still, the pair seems to be starting a downward trend, which means that it may continue falling as bears target the next support ay 1.1700.

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