EUR/USD trades steadily ahead of ECB policy decision

The euro traded steadily against the US dollar on Thursday ahead of European Central Bank (ECB) policy decision due later in the day, after yesterdays upbeat German factory orders provided support for the common currency.

EUR/USD reached a session high at 1.3529 at 6:00 GMT, after which consolidation followed at 1.3517, gaining a mere 0.02% for the day. Support was likely to be received at November 6th low, 1.3466, while resistance was to be met at November 6th high, 1.3548.

A report yesterday showed that Germanys factory orders demonstrated an unexpectedly strong increase in September, 3.3% on a monthly basis and 7.9% on annual basis, as both figures outperformed preliminary estimates. This data suggested that a support has been provided by other recovering Euro zone countries as well as increasing domestic demand. Germanys largest export market, the Euro zone, has managed to emerge from 18-months of recession during the second quarter of the year. Sales of automobiles in the region rose at the fastest pace in two years in September, while economic sentiment improved more than projected in October. Experts from Bundesbank project that German economy will expand also during the final quarter of the year, though growth rate may slow down during the three months through September. Following this data, the euro received strong support against peers.

However, retail sales in the Euro zone decreased in September, implying that consumer spending remained suppressed amid record high rate of unemployment and weaker gain in remuneration. Sales fell 0.6% in September on a monthly basis and rose 0.3% on annual basis. The indicator recorded gains in July and August. Such a performance suggested that despite higher consumer confidence, households in the euro region were still passive and inflationary pressure – insufficient.

Despite the fact that economic recovery in the single currency bloc remains fragile, the European Central Bank is seen by experts as keeping its main refinancing rate at the record low level of 0.50% at the policy meeting today. 67 out of 70 respondents participated in a survey by Bloomberg News predict such a scenario. Bank of America Corp., Royal Bank of Scotland Group Plc and UBS AG, however, project that the central bank will introduce a cut in borrowing costs by 25 basis points. They suggest that the ECB will probably wait for additional data, including forecasts for economic growth and inflation rate, which are scheduled for release in December.

Euro zones Gross Domestic Product probably shrank 0.3% in 2013 from a 0.7% drop in 2012, according to the median of estimate, compiled by Bloomberg. It is expected that blocs economy will grow 1% in 2014.

Meanwhile, US preliminary Gross Domestic Product probably expanded at a 2% annualized rate during the third quarter of the year, slowing down in comparison with the 2.5% growth, recorded during the previous three months, according to the median estimate of economists in another survey. The official GDP report is due to be released later in the day. On the other hand, non-farm payrolls in the country probably rose by 120 000 in October, following a 148 000 gain in September, a separate poll pointed. US Department of Labor will release the official figures tomorrow.

Elsewhere, the euro was higher against the sterling, as EUR/GBP cross gained 0.06% on a daily basis to trade at 0.8410 at 8:57 GMT. EUR/JPY pair was advancing 0.15% to trade at 133.54 at 8:58 GMT.