Euro steady after German consumer confidence

EUR/USD continues to have a quiet week, as the euro appears content to trade close to the 1.06 line.

German consumer confidence ticks higher

Germany’s consumer confidence is inching higher but remains buried in negative territory. The GfK Consumer Sentiment Index is forecasting a read of -37.8 for January, up slightly from -40.1 in December and above the consensus of -38.0 points. This marks a third straight improvement, but the rise has been marginal, as consumers remain deeply pessimistic about the economic outlook. The slight uptick is due to a drop in energy prices coupled with the German government’s relief package to lower energy costs.

The German release mirrors Tuesday’s eurozone consumer confidence release, which ticked higher to -22.2 in December, up from -23.9 and just shy of the consensus of 22.0 points. The weak confidence levels are expected to translate into weaker consumer spending, which will dampen economic growth in Germany and the rest of the eurozone. German business confidence is also at low levels but hit a 5-month high in December, rising to 88.6 points.

US consumer confidence soars

Conference Board consumer confidence for December climbed to its highest level since April, with a reading of 108.3 points. This was sharply higher than the previous reading of 101.4 and the consensus of 101.0 points. According to the CB, inflation expectations fell to their lowest level since September 2021, in large part due to the drop in gas prices.  There is a growing feeling that the worst of inflation is behind us, although the Fed would be quick to remind us that inflation is not yet beat and remains unacceptably high. Despite the constant talk about a recession, the CB survey noted improvements in both the current situation and future expectations of consumers.

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EUR/USD Technical

• 1.0610 is a weak resistance line. Above, there is resistance at 1.0714
• 1.0484 and 1.0380 are providing support

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