EUR/USD drops below $1.12 on upbeat US data

The US dollar struck higher on Wednesday, as the currency was underpinned by some better-than-expected US economic data.

The pound, meanwhile, is trading in a narrow range so far this morning, with GBP/EUR stable at €1.1899 and GBP/USD buoyed at $1.3349. GBP/CAD is rangebound at C$1.6877, while GBP/AUD and GBP/NZD are holding steady at AU$1.8532 and NZ$1.9423 respectively.

Looking ahead, speeches by the European Central Bank’s (ECB) Christine Lagarde and the Bank of England’s (BoE) Andrew Bailey will likely be in the spotlight today.

What’s been happening?

The US dollar rallied during yesterday’s European session, in response to some upbeat US data releases.

This included a larger than expected drop in initial jobless claims as well as the latest PCE price index, as the Federal Reserve’s preferred indicator for inflation also printed above expectations in October, further boosting expectations the Fed may look to accelerate its current tightening cycle.

These gains were reinforced later in the evening as the latest FOMC minutes indicated there is some appetite amongst policymakers for raising interest rates earlier than currently planned.

The euro, meanwhile, was pressured by an underwhelming IFO business climate index from Germany, in addition to growing concerns over Europe’s Covid resurgence.

Finally, the pound traded without any strong directional bias on Wednesday, in spite of the Confederation of British Industry’s (CBI) latest industrial trends orders index printing at a record high this month.

What’s coming up?

Kicking off today’s session was the publication of Germany’s latest GDP release, which confirmed growth in the Eurozone’s largest economy slowed more than expected in the third quarter.

Still to come will be a speech by ECB President Christine Lagarde later this afternoon. Her remarks could propel the euro lower today as she is likely to reiterate the bank’s commitment to its ultra-loose monetary policy.

Likewise, the focus for GBP investors today will be on a speech from BoE Governor Andrew Bailey, Bailey recently appeared to play down the chances of the BoE hiking interest rates in December, and a similarly dovish tone today could undermine the pound.

Finally with US markets closed for Thanksgiving, thin trading conditions in the US dollar could leave it a little directionless today.