Stronger French economic data and growing concerns about the US economy is helping the Euro rally for the fourth trading day in a row. The currency pair is now within 50 pips of its all time high and barring any unforeseen circumstances, that level is too close for traders not to a test.
French industrial production jumped 1.3 percent in the month of July, signaling a recovery in GDP growth in the third quarter. In an environment where the outlook for US growth is worsening, the upside surprise to European data is shining a bright light on the ECB?s still hawkish monetary policy. We do not believe the ECB will raise rates again this year, but they still left the door open for that possibility which at bare minimum tells us that they are not considering lowering interest rates. A number of ECB officials will be speaking tomorrow including Trichet. The ECB has not decided on what they will be doing with interest rates over the next few months and we expect the comments tomorrow to reflect that.
Written by Kathy Lien, Chief Currency Strategist of DailyFX.com