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EUR/USD: EUR/USD little changed following US wholesale inventories

H.S. Borji
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The directionless euro was little changed against its US counterpart Wednesday, as Eurozone industrial production rebounded while US wholesale inventories rose modestly.

The EURUSD bounced from an intraday low of 1.2432. The pair would subsequently consolidate at 1.2476, little changed from the previous close. Initial support is likely found at 1.2413 and resistance at 1.2519.

The euro rebounded from a 26-month low earlier this week as a dearth of economic data kept the dollar bulls subdued. The EURUSD fell to the low 1.24 region Tuesday, but regained its footing to avoid Friday’s mid-123 level.

In economic data, Eurozone industrial production rebounded in September, although concerns about the health of the 18-nation currency bloc continued to weigh.

Month-on-month, industrial production increased 0.6 percent, lower than the 0.7 percent forecast by economists, the European Commission reported today. On a monthly basis, output had declined 1.4 percent in August.

Compared to year-ago levels, industrial production also rose 0.6 percent in September, following a 0.5 percent drop the previous month. Economists forecast an annual decline of 0.3 percent in September.

September’s rebound did very little to reassure the markets about the health of the euro area economy. The currency region is expected to grow just 0.8 percent this year after back-to-back years of recession.

The Eurozone economy grew slightly in the second quarter, the EC reported last month in a revised estimate that factored in a new accounting standard. Under the previous accounting standard, GDP was flat in the second quarter.

The EC will post an advance estimate of third quarter growth Friday. Today’s industrial production figures suggest the Eurozone avoided contraction in the third quarter, although the outlook on the Eurozone has not changed in the eyes of most economists, who anticipate very slow growth in the coming year. The Eurozone economy is forecast to grow just 0.1 percent in the July to September period.

Germany, which accounts for about a third of Eurozone GDP, contracted in the second quarter. Economists expect the German economy to rebound just 0.1 percent in the third quarter.

Weak economic growth and the threat of deflation has raised speculation the European Central Bank will inevitably expand its monetary program. According to market analysts, the ECB could begin buying sovereign government bonds as early as next year.

In US data, wholesale inventories rose faster than forecast in September, although the overall rate of growth was modest.

Stockpiles held by wholesale businesses increased 0.3 percent in September, half the rate of the previous month, the Commerce Department reported today. Economists forecast a gain of 0.2 percent.

Wholesale inventories excluding automobiles, the component used to calculate GDP, increased 0.1 percent, official data showed.

The September data are unlikely to impact third quarter GDP estimates. The US economy expanded 3.5 percent annually in the third quarter, beating estimates.

On Friday the Commerce Department will report on business inventories, a broader measure of stockpile accumulation that also includes retailers and manufacturers. Business inventories are forecast to increase 0.2 percent in September.

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