Published on 21.03.2023 13:42

The Euro is on track to rack up its 4th straight day of gains against the US dollar in today’s trading session after disappointing economic data yesterday threw into doubt the expected rate increase tomorrow from the US Federal reserve.

The Conference Board's consumer confidence index dropped to 102.9 this month from 106.0 against analysts’ expectations for a figure of 108.5. The second straight monthly decline mostly reflected pessimism among consumers with annual incomes in the $35,000-$50,000 range.

Excessive consumer spending has caused spiraling inflation in the US which caused the Fed to embark on an intense interest rate hiking cycle so the pullback in spending will be welcome relief for the US central bank.

“Consumers may be showing early signs of pulling back spending in the face of high prices and rising interest rates. Fewer consumers are planning to purchase homes or autos and they also appear to be scaling back plans to buy major appliances. Vacation intentions also declined in February." said Ataman Ozyildirim, Senior Director, Economics at The Conference Board. 

As we entered today’s European session, we witnessed the release of the German ZEW headline number which showed that the Economic Sentiment Index worsened in March, arriving at 13.0 from 28.1 in January, missing the market expectation of 16.4.

Meanwhile, the Current Situation Index came in at -46.5 from -45.1, worse than the market expectation of -45.8.

During the same period, the Eurozone ZEW Economic Sentiment Index slumped to 10.0 from 29.7, compared to the estimates of 23.2. 

The Euro shrugged off the disappointing news and currently remains around the 1.0776 mark.

Looking further ahead today, there is not much movement expected in the EUR/USD currency pair as traders await the latest interest rate decision from the US Federal Reserve tomorrow.

There is growing speculation that the Fed may leave rates on hold instead of hiking by 25 basis points which would send the Euro on a trajectory to 1.10.