EUR/USD consolidates near 1.1700 as the US dollar tumbles

• The euro rallies towards 1.1700 against a weaker US dollar.
• The greenback tumbles as US GDP data disappoints.
• EUR/USD rally to 1.1680 expected to be short-lived – TDS.

The euro has surged about 0.75% against the US dollar so far today to post its strongest daily performance over the last months. The pair accelerated its recovery from week lows at 1.1580 area, to consolidate a few pips shy of 1.1700, favored by broad-based USD weakness.

The dollar dives on downbeat US GDP data

The US dollar has tumbled on Thursday, hammered by the disappointing Gross Domestic Product figures released by the US Commerce Department. According to advanced estimations, US economic growth decelerated to a 2% pace in the third quarter, from 6%,  even below the 2.7% pace expected. Supply chain restrictions and a sharp decline in consumer spending have been singled out as the main reasons behind the economic slowdown.

The third quarter’s data represents the weakest performance since the second quarter of 2020, with economic activity hampered by the first COVID-19 restrictions, and have crushed hopes of a strong post-pandemic recovery.

Furthermore, the impact of the dovish European Central Bank’s monetary policy statement on the euro has been muted. The ECB has stuck to the plan, with President, Christine Lagarde pushing rate hike hopes back to, at least, late 2022, as, according to the Bank, inflationary pressures will decline in the course of next year.

EUR/USD rally is expected to be short-lived – TDS

FX Analysts at TD Securities, contemplate the current euro recovery as a corrective reaction with a limited scope: “We think that there is some risk of EUR/USD testing 1.1680 resistance, but extrapolating beyond that seems like a big ask a week ahead of the Fed's meeting where tapering will be announced (…) As much as we think there is scope to test 1.1680 resistance, this should be short-lived.”

Technical levels to watch