EUR/USD has posted slight losses in the Wednesday session, erasing the gains seen on Tuesday. Currently, the pair is trading at 1.1673, down 0.18% on the day. On the release front, German GfK Consumer Climate edged lower to 10.5, shy of the estimate of 10.6 points. In France, consumer spending remained pegged at 0.1%, missing the estimate of 0.3%. Preliminary GDP posted a gain for of 0.2% for a second straight quarter. In the U.S, Preliminary GDP in the second quarter is expected at 4.0%. The previous GDP report came in at 4.1% in July. We’ll also get a look at Pending Home Sales, which is forecast to drop to 0.3%. On Thursday, Germany releases Preliminary CPI and the U.S publishes personal spending and unemployment claims.
The euro has taken a pause from its recent rally, which began on Friday and saw the euro gain 1.4%. On Tuesday, EUR/USD punched above the 1.17 line for the first time since August 1. The euro received a boost early in the week from an unexpectedly strong business confidence report in Germany. The Ifo Business Climate report improved to 103.8, easily beating the estimate of 101.9 points. This marked the first time this year that business confidence has improved, thanks to a strong German economy and a pause in the global trade war. On Wednesday, the news was less positive, as German GfK Consumer Climate dropped from 10.6 to 10.5 points, continuing the downward trend which has marked 2017. Back in January, the indicator was at 11.0 points, underscoring a decrease in consumer confidence.
The euro was last above the 1.20 line in May, and this symbolic level could remain elusive for quite some time. The reason? Mario Draghi and his ECB colleagues continue to send out the message that the ECB has no plans to raise rates until after the summer of 2019. The markets are not expecting a rate hike before October 2019, which means that the euro won’t be able to attract investors based on higher interest rates. This means that the euro is not particularly attractive unless there is an unexpected improvement in the German and eurozone economies.
