The U.S. dollar extended the gains recorded in the past session after the heavy fundamentals from Europe, which sent the euro further to the downside, and supported demand for low yielding currencies as we can see the U.S. dollar and the Japanese yen gained strength against other major currencies ahead of the retail sales and inflation date from the world's largest economy.
The U.S. dollar index (USDIX) extended the huge gains recorded in the past session, where investors are demanding safe havens excessively in order to avert as much risk as possible. The U.S. dollar gained the most today after the opening of 77.46, recording the highest at 78.01 and the lowest at 77.43, and is currently trading around 77.86.
Markets were focused on the fundamentals from the euro zone, Germany and the United Kingdom during the European session; however, investors' eyes shifted to the U.S. session awaiting critical fundamentals from the world largest economy, especially the closely watched retail sales index and the core producer price index.
The U.S. dollar appreciated against the euro, which extended earlier losses after the release of fundamentals, where the annual gross domestic product index slowed in the third quarter to 1.4% from 1.6% in line with expectations, while ZEW survey for the economic sentiment, which tracks the European confidence, dropped in November beyond expectations to 59.1 from 51.2
But on the other hand, the unexpected trade surplus from the euro-area region hasn't supported the euro at all, where we can see pessimism is dominating the market and the sentiment deteriorated further, as investors lost faith in the euro-area region and now they are waiting for more serious steps and implementations of the decisions and the plans taken before weighing them positively.
The euro zone seasonally adjusted trade balance improved sharply and showed 2.1 billion euros surplus from the previous deficit of 1.2 billion euros, better than the expected widening deficit of 1.5 billion euros.
The euro as mentioned before lost strength against the U.S. dollar, where after opening the session at $1.3629, the EUR/USD pair retreated to a low of $1.3511 after reaching the highest at $1.3640, and is trading in the moment at $1.3544.
Moreover, the sterling pound fluctuated heavily after the inflation data from the United Kingdom, which showed slight improvement in the month of October, where after reaching the highest record in three year, inflation retreated to 5.0% from 5.2%, better than expectations of 5.1%. In addition, the annual RPI index, also known as the cost of living index, slowed to 5.4% from 5.6% in better than expectations of 5.5%.
The Sterling pound lost slightly against the U.S. dollar, but appreciated sharply against the euro, where the GBP/USD pair is currently trading around $1.5890, after the opening of $1.5906. The pair also recorded a high of $1.5931 and a low of $1.5828.
Concerning the EUR/GBP, the pair declined sharply after starting the session in Asia at 0.8566, to currently trade around 0.8527. The pair recorded the highest at 0.8574 and the lowest at 0.8517.
Finally, pessimism is still evident in the market, while volatility and market instability will affect currencies until the world's largest economy releases the awaited critical data, but in general we expect markets to remain negatively biased during the session today awaiting some cheerful data from Europe to revive optimism and spread hope.