EUR/USD has edged lower in the Monday session, as the pair trades at 1.0740. On the release front, it’s a quiet start to the week, with no major events in the US or Europe. German Factory Orders sparkled in December, with a gain of 5.2%, compared to the forecast of 0.6%. Eurozone Retail PMI dipped to 50.1 points, while Sentix Investor Confidence dropped to 17.4 points, above the estimate of 16.7 points. In the US, there are two minor events on the schedule. On Tuesday, the US releases JOLTS Job Openings, with the indicator expected to rise to 5.56 million.
German numbers were a mixed bag last week, but manufacturing numbers remain strong. On Monday, Factory Orders sparkled with a gain of 5.2%. This follows German Manufacturing PMI, which improved to 56.4, its strongest reading in three years. We’ll get a look at Industrial Production on Tuesday. Meanwhile, inflation has headed higher in the Eurozone, buoyed by stronger economic growth and higher oil prices. This is positive news for the ECB, which has long tried to raise inflation with an ultra-loose monetary policy. Still, inflation levels remain well below the ECB’s target of 2 percent, and analysts are not expecting any drastic changes in monetary policy in 2o17.
On Friday, US job numbers were mixed. Nonfarm payrolls jumped to 227 thousand, well above the estimate of 170 thousand. However, wage growth disappointed, as Average Hourly Earnings slipped to 0.1%, short of the forecast of 0.3%. There’s no arguing that the US economy is performing well, but there is a sense of uneasiness in the markets as Donald Trump continues to create controversy and dissent both at home and abroad. Trump has picked a fight with Mexico and his travel ban on Moslems from seven countries has created a strong backlash. Moreover, the lack of an economic policy is a major source of concern and the the post-election euphoria which sent the markets higher appears to have dissipated. The Federal Reserve is no less in the dark than the rest of us, and is expected to adopt a wait-and-see attitude in the coming months. If the economy continues to grow, there is a strong likelihood of another rate hike in the first half of 2017, which is bullish for the dollar. On the other hand, if Trump makes good on his promises to “make America first” and implement protectionist policies, the greenback could lose ground against major currencies such as the euro.
