The euro has edged higher in the Friday session. Currently, the pair is trading at 1.1945, up 0.27% on the day. On the release front, the eurozone trade surplus, which narrowed to EUR 18.6 billion in July, well short of the estimate of EUR 20.1 billion. This marked the smallest trade surplus since February. In the US, it’s a busy day, so we could see some movement from EUR/USD. Today’s highlights are Retail Sales and Core Retail Sales. As well, the US will release the Empire State Manufacturing Index and UoM Consumer Sentiment.
The German economy continues to impress. Unemployment levels remain low, growth is steady, and the country even has a budget surplus. However, analysts are divided on the extent of the momentum. The German Economy Ministry is predicting that the economy could slow in the second half of 2017, and is holding to its forecast of 1.5% growth this year. The BDI Group is projecting an expansion of just above 2.0%, while the International Monetary Fund has pegged growth at 1.8% for 2017. Strong German growth in the second half would be good news for the streaking euro.
Germany will hold a federal election on September 24, and Angela Merkel is widely expected to win her fourth term as prime minister. French President Emmanuel Macron, a staunch supporter of a unified Europe, is hoping to work with Merkel and reform the eurozone. Macron’s proposal includes a eurozone finance minister who would be in charge of a eurozone budget. Macron’s call for greater cooperation is linked to Britain’s exit from the EU, which could lead to divisions among the remaining 27 members in the bloc. However, the French ambitious plan will need Germany’s support before it can become a reality. Will Germany embrace the idea? Angela Merkel’s has indicated that she is open to the idea, but on Wednesday, Jean-Claude Juckner, head of the European Commission, dismissed the plan, saying he favored a finance minister for the EU but was against a separate eurozone budget and finance minister. Even if the plan is not adopted, we can expect a Macron-Merkel alliance to take steps which will strengthen Franco-German ties and further unify the eurozone.
