EUR/USD is almost unchanged in the Tuesday session. Currently, the pair is trading at 1.1649, up 0.08% on the day. On the release front, there are no key eurozone events. PPI jumped to 0.8%, well above the estimate of 0.4%. Retail Sales edged down to 0.0%, shy of the forecast of 0.1%. On Wednesday, Germany and the eurozone will release Services PMIs.
German and eurozone manufacturing PMIs in June pointed to expansion. However, the indicators also continued a troubling downward trend, as the both PMIs have dropped for six straight months, raising concerns among investors about the strength of the eurozone economy. Recent trade tensions are threatening to hamper the eurozone export sector, which in turn could weigh on manufacturing output. This has put the spotlight on German and eurozone manufacturing PMIs, which are bellwethers of the strength of the manufacturing sector. Germany, the locomotive of the eurozone, produced soft consumer numbers last week. Retail Sales plunged 2.1%, its steepest decline in 2018. As well, Preliminary CPI fell to 0.1%, down from 0.5% a month earlier.
On Friday, the euro moved higher, in response to a dramatic announcement that EU leaders had hammered out a deal on migration. However, the deal was short on details appears to be a stopgap which papers over the deep divisions that still remain in the EU over immigration. German Chancellor Angela Merkel didn’t have much time to celebrate the news, as her government is again in crisis. On Sunday, German Interior Minister Horst Seehofer offered to resign, saying the migrant deal didn’t go far enough in protecting Germany from illegal immigration. Seehofer heads the CSU, which is the junior coalition partner in the coalition. Merkel will have to find a way to keep Seehoger on board if she wants to stay in power, and if this political crisis continues, the euro could lose ground.
