EUR/USD is showing little movement in the Friday session. Currently, the pair is trading at 1.1661, up 0.08% on the day. On the release front, German Preliminary CPI is expected to dip to 0.1%. The US will release key consumer spending and inflation reports, as well as unemployment claims. On Friday, Germany releases retail sales and the eurozone publishes CPI Estimate. In the U.S, the key event is UoM Consumer Sentiment, which is expected to drop to 95.5 points.
Eurozone inflation is expected to dip lower in August. CPI Flash Estimate dropped from 2.1% to 2.0%, shy of the estimate of 2.1%. Core CPI is also forecast to tick lower to 1.0%, missing the estimate of 1.1%. Earlier in the week, German Preliminary CPI rose 1.9% in August (year-on-year), down from 2.1% a month earlier. These releases were within expectations, and the slight easing in inflation is unlikely to change plans at the ECB. The central bank is scheduled to wrap up its EUR 2.6 trillion asset-purchase scheme in December. However, it’s unclear when the ECB will raise interest rates. ECB policymakers have been somewhat vague on the issue, saying that rates will not rise until after next summer. Some analysts have circled October 2019 as a possible date for the first ECB rate hike in years.
The trade spat between the US and China may have take a pause, but investors remain jittery. The trade war has taken a bite out of Chinese exports, as the “new export order” subindex in China’s official PMI dropped below 50 in August, the third straight month that the index has contracted. President Trump has threatened to slap additional tariffs on some $200 billion of Chinese products, a move which could take place as early as next week. Further tariffs would have a damaging effect on the Chinese economy, and it’s likely that China would respond in kind. The current trade spat has already seen the U.S dollar gain ground against rivals such as the euro, and fears of a global trade war could see the greenback make further gains.
