EUR/USD has started the weeks with slight gains. In the Monday session, the pair is trading at 1.1686, up 0.25% on the day. On the release front, today’s key event is German Preliminary CPI, which is expected to climb to 0.4%. In the U.S, Pending Home Sales is forecast to rebound with a gain of 0.4%, after two straight declines. Tuesday will be busier on both sides of the pond. Germany releases retail sales and the eurozone publishes CPI and GDP reports. The U.S will publish consumer spending and inflation indicators, as well as CB Consumer Confidence.
U.S numbers were sharp on Friday, but the dollar couldn’t gain ground against the euro. Advance GDP, the first of three GDP reports in the second quarter, posted a strong gain of 4.1%, just shy of the forecast of 4.2%. This was much stronger than the gain of 2.2% in Q1 and marked the strongest quarter of economic growth since 2014. As well, UoM Consumer Sentiment dipped lower to 97.9 but still beat the estimate of 97.1 points.
There were no surprises from the ECB, which made no changes to monetary policy at its Thursday meeting. The main refinancing rate remains at 0.0%, where it has sat since January 2016. In a policy statement, policymakers reiterated that rates would remain at current levels “through the summer of 2019”, and “as long as necessary to boost inflation to the target of just under 2.0%. There has been some discussion as to the exact meaning of “through the summer”, but what is clear is that the ECB plans to keep rates at a flat 0.00% after winding up its bond-purchase scheme at the end of the year. This weighed negatively on the euro, which dropped 0.07% on Thursday. The exact timing of a rate hike will depend on the strength of the eurozone economy and inflation levels – if the second half of 2018 is marked by stronger growth and higher inflation, there will be pressure on the ECB to raise rates earlier rather than later in 2019.
