Weak German Industrial Production Pressures Euro

A EUR/USD looked promising early in the session, but sellers came in to drive it lower, following the release of bearish economic news out of Germany.

The Euro has been consolidating for two days since the European Central Bank delivered less-hawkish news last week at its monetary policy committee meeting. Traders had been looking for a new, more aggressive stimulus plan. Instead, the ECB decided to leave current stimulus measures in place and to gradually introduce stimulus as needed.

The news that German industrial production fell the most since 2009 helped pressure the EUR/USD, leading to talk that the ECB may have to be expand its stimulus.

The GBP/USD rose the most since early last week as U.K. manufacturing grew for a third month in August. According to the Office for National Statistics Office, manufacturing production in the U.K. rose 0.1 percent from July.

Today’s gains could be limited because of Thursday’s Bank of England meeting where members will debate the appropriate timing of the next interest rate hike.

December Comex gold posted a modest gain on Tuesday, following Monday’s surge. Yesterday’s rally was triggered by short-covering and profit-taking, following a steep drop in the U.S. Dollar.

Today, the dollar is posting a modest gain, leading to limited upside action in the gold market. Look for gold to recover if the dollar breaks into the close.

November crude oil continued to consolidate around the psychological $90.00 level. Although the long-term fundamentals are bearish, the market is oversold according to technical indicators. This is helping to underpin the market.

Fundamentally, the huge supply is keeping a lid on prices, however, geopolitical concerns in Ukraine and the Middle East appear to be limiting losses.