EUR/USD has pushed above the 1.08 line on Friday, courtesy of strong PMI numbers out of Germany and the Eurozone. In Germany, Flash Manufacturing PMI jumped to 58.3, above the forecast of 56.6 points. Eurozone Flash Manufacturing PMI improved to 56.2, above the estimate of 55.3. Both indicators hit their highest levels since 2011. There was further good news, as Services PMIs in Germany and Europe also pointed to stronger expansion. In the US, today’s highlight is Core Durable Goods Orders, which is expected to rebound with a gain of 0.5%, after a decline of 0.2% in the previous reading.
It promises to be busy Friday on Capitol Hill, with the focus on health care legislation. President Trump, who campaigned on a promise to repeal the Affordable Care Act (“Obamacare”), wants the House of Representatives to vote on Friday on a bill which repeals and replaces part of Obamacare. A vote on Thursday was shelved, as there was not enough support to pass the bill. The proposed health bill has become a litmus test for the Trump administration, as a failure to pass the bill would indicate that Trump may not be able to push through Congress his pledges to lower taxes and increase fiscal stimulus. The dollar has sustained broad losses in the past week, in part over market frustration over the lack of any details regarding economic policy from Trump. If the President cannot make good on his assault on Obamacare, the dollar could continue to lose ground.
The economic picture has brightened in the eurozone, as the economy has improved in recent months. The German economy, the largest economy in Europe, remains in solid shape and is expected to expand 1.5% in 2017. However, consumer confidence has not followed suit. GfK German Consumer Climate lost ground for a second straight month, as the GfK indicator fell to 9.8 in March, its lowest level since November 2016. Eurozone Consumer Confidence remains weak, as the indicator posted a decline of -5 in March, almost unchanged. These soft numbers are largely a result of higher inflation, as consumers are concerned about their reduced purchasing power.
