31.01.201808:12 Forex Analysis & Reviews: Negative data from the eurozone will put pressure on the euro

After a noticeable weakening of the US dollar at the end of the past year and at the beginning of 2018, the market is now showing a mood of uncertainty. The incoming contradictory data of economic statistics as well as statements by officials again force investors to wait.

The data on the eurozone's GDP, which were published on Tuesday, turned out to be positive and confirmed the continued strong upward trend in the growth of the European economy. However, the figures on consumer inflation "spoil" this positive picture and make us think seriously.

According to the published data, the eurozone's GDP grew by 0.6% in the fourth quarter. On an annual basis, it grew by 2.7%. The value of the indicator was in line with expectations but the revision of previous data upward was unexpected. The quarterly value of the indicator was raised to grow to 0.7%, and for in annual terms to 2.8%.

Against this background, the euro began to rise sharply against the dollar and the general sentiment in the currency markets also shifted in favor of the latter. The stimulus for such dynamics was the growing expectations that the ECB will definitely stop stimulating the European economy this year. However it is as they say, "we need to march to the same tune". Despite this, sentiment changed dramatically after the release of data on consumer inflation in Germany.

The consumer price index (CPI) in Germany showed a slowdown in January. In annual terms, the indicator fell to 1.4% against the value a year earlier of 1.6%. Its monthly January value decreased by 0.7% against the expectation of a decrease of 0.5% and an increase in December by 0.6%. Such a negative trend has not been observed since June last year.

It is likely that this event will be local on the background of a drop in consumer activity after the New Year and Christmas holidays. Now, if it turns out not to be so then the ECB will be in question. But is it in a hurry with the decision to stop supporting the economies of the euro area countries?

Today, the focus of the market will be data on consumer inflation in the euro area. If they also turn out to be weak and the Fed's resolution on the results of the meeting, which is held today, we can expect a local fall of the euro in the currency markets.

Forecast of the day:

The EURUSD pair is consolidating in the range of 1.2360-1.2455. However, everything can change against the background of weak data on consumer inflation in the euro area and the "hawkish" statement by the Fed. The pair can break out of the range and go to 1.2200.

The GBPUSD pair is balancing again in anticipation of news on the talks regarding the withdrawal of Britain from the EU. The local fall of the euro could lead to the same decline of the sterling after breaking through the level of 1.4115. The pair could fall to 1.3950.