EUR/USD is lower in the Wednesday session, following the downward trend which was seen on Tuesday. Currently, the pair is trading at 1.1619, down 0.37% on the day. The pair is currently at its lowest level since July 2. On the release front, Eurozone Final CPI edged up to 2.0%, matching the estimate. Final Core CPI dipped to 0.9%, short of the estimate of 1.1%. The markets are expecting mixed construction numbers – Building Permits are expected to climb to 1.33 million, while Housing Starts are forecast to drop to 1.32 million. Later in the day, Federal Reserve Chair Jerome Powell testifies before the House Financial Services Committee. On Thursday, the U.S releases the Philly Fed Manufacturing Index and U.S unemployment claims.
A milestone was reached on Thursday, as Eurozone Final CPI reached the 2.0% threshold in the June release. On an annualized basis, Final CPI also came in at 2.0%. This marks the highest level since February 2017. As the ECB prepares to wind up its asset-purchase program, the markets are looking for clues about a possible rate hike. Such a move would likely have a significant impact on the markets, as the ECB last raised rates back in 2011. If inflation levels continue to rise, there will be more pressure on the ECB to consider a rate hike sooner rather than later.
Fed Reserve Chair Jerome Powell reaffirmed his positive outlook on the U.S economy in testimony before the Senate Banking Committee. Powell said that he expected the labor market to remain tight and infatlion to stay close to the Fed’s target of 2 perecent for the next several years. Powell added that the Fed would continue to gradually raise interest rates. Lawmakers appeared satisfied with current monetary policy, but Powell did face some pointed questions regarding the escalating trade war, which has raised concerns that economy could take a downturn if the tariff battles continue.
With global protectionist winds getting stronger by the week, Japan and the EU signed a free trade agreement on Tuesday. At the signing ceremony, Prime Minister Shinzo Abe and European Council head Donald Tusk said that the deal is a response to growing concerns about protectionism. The agreement will eliminate most tariffs between the EU and Japan, and will be particularly beneficial for Japanese car makers and European food producers. No less important, the agreement marks the largest free trade agreement in the world, as the EU and Japan cover about one-third of global GDP and some 600 million people.
