The euro has ticked upwards in the Wednesday session, after recording strong gains on Tuesday. Currently, EUR/USD is trading at the 1.11 line. On the release front, Eurozone Final CPI climbed 1.9%, matching the estimate. There are no major US releases on the schedule. On Thursday, the US releases unemployment claims and the Philly Fed Manufacturing Index. The president of the ECB, Mario Draghi, will speak at an event at the University of Tel Aviv.
The markets continue to do a good job of predicting key consumer data, as Eurozone Final CPI matched the forecast with a strong gain of 1.9% in April. This figure was considerably higher than last month’s gain of 1.5%. Eurozone inflation is closing in on the ECB’s target of 2.0%, which could increase pressure on the ECB to consider tapering its ultra-loose monetary policy. Germany, for one, is finding that ultra-low interest rates is hampering growth, and wants Brussels to adopt a tighter monetary policy. On Tuesday, Eurozone Flash GDP was unrevised from the April forecast, posting a gain of 0.6% in the first quarter. The eurozone continues to show improved numbers in 2017, boosted in no small part by the German economy, which also expanded 0.6% in the first quarter. The well-respected ZEW Economic Sentiment surveys, which gauge optimism among investors and analysts, were a mixed bag for May. The German indicator improved to 20.6, short of expectations. What was more surprising was the unexpected jump from the Eurozone indicator, which improved to 35.1, its strongest level in almost two years.
The euro posted considerable gains on Tuesday, buoyed by the political uncertainty which has engulfed Washington. News reports on Tuesday said that Trump asked former FBI director James Comey to end an investigation into ties between Russia and Trump’s former security adviser, Michael Flynn. Another brewing controversy is Trump’s passing of classified intelligence to the Russian foreign minister. Trump initially denied the claim, but has since backtracked, admitting that he did share intel with the Russians, but that he had acted within his rights. With the Trump administration busy putting out political fires, investors are growing increasingly nervous that the president’s agenda for a stimulus package and tax reform will stall, and the euro has taken advantage, gaining 1.5% against the greenback.
