EUR/USD continues to rally, as the pair trades at its highest level since September 22. In Friday trade, EUR/USD is trading at 1.1980, up 0.33% on the day. The final trading day of 2017 has just one key event, German Preliminary CPI. The indicator is expected to accelerate to 0.5% in December. In the eurozone, M3 Money Supply and Private Loans both matched their estimates of 4.9% and 2.8%, respectively.
Christmas week is traditionally light on economic releases and the markets are in slow gear until after New Years’. Still, the euro has looked sharp and is up about 1.0% this week, with the symbolic 1.20 line in striking distance. The US dollar has been under pressure, and disappointing consumer confidence and unemployment numbers didn’t help the cause. We could see the greenback rebound in January, as the US economy continues to show strong growth and the Federal Reserve is widely expected to raise rates for a second straight month at its January policy meeting.
In a nod to stronger economic conditions in the eurozone, the ECB announced in October that it would begin tapering its monthly bond purchases in January, from EUR 60 billion to 30 billion. Mario Draghi & Co. are playing it safe, however, as the ECB has extended the purchases through September 2018. If inflation remains below the ECB target of around 2.0%, the purchases will likely continue after that date. Economic growth in the bloc has been steady, with GDP expanding 0.7% in the third quarter, after a 0.6% in the second quarter. Of note, the ECB upwardly revised its 2018 growth forecast from 1.8% to 2.3%.
