EUR/USD has ticked lower in the Thursday session, after posting considerable gains on Wednesday. Currently, the pair is trading at 1.1354, down 0.11% on the day. On the release front, German Preliminary CPI is expected to post a gain of 0.2%, unchanged from the previous release. German unemployment change came in at -16 thousand, better than the forecast of -10 thousand. It’s a busy day for U.S. indicators. Core PCE Price Index and Personal Spending are expected to post gains of 0.2% and o.4%, respectively. Unemployment claims are forecast to drop to 221 thousand and the Federal Reserve releases the minutes of its November policy meeting. On Friday, the eurozone releases CPI Flash Estimate and the U.S. publishes Chicago PMI. As well, the G-20 begins a 2-day summit in Argentina.
The U.S. dollar was broadly lower on Wednesday, courtesy of surprisingly dovish remarks from Fed Chair Jerome Powell. The Fed chair said that the current rate levels of 2-2.5 percent is “just below” the neutral range. This is in sharp contrast to Powell’s remarks just last month, when he said that rates were “a long way from neutral”. The backtrack is likely due to the change in economic conditions in recent weeks – GDP has been slowing, the stock markets are down and oil prices have fallen. The Fed may have decided that this required an easing up on rate hikes in 2019, and Powell delivered this message to the markets. Only a few months ago, there was talk of ‘a rate hike each quarter’ in 2019, but now, some analysts are predicting only one or two hikes next year. Despite Powell’s dovish remarks, the odds of a December rate have not diminished, which stand at 79%, according to the CME Group.
German confidence indicators slowed in November, and that could be bad news for the German and eurozone economies. GfK consumer climate dropped to 10.4 points, its weakest level since May 2017. Earlier in the week, Ifo Business Climate dropped to 102.3, missing the forecast of 102.0 points. This marked a 4-month low. The ongoing U.S-China trade war has hurt the German export sector, as German companies that export to both the U.S. and China are now facing higher tariffs. Germany’s economy posted a rare decline in the third quarter, with a contraction of 0.2%. Another problem is lower eurozone growth, as weak economic activity in the third quarter appears to be the story in the fourth quarter. As well, the looming departure of Britain from the European Union and the crisis over the Italian budget have weighed on business and consumer confidence levels in German.
