The euro has ticked lower in the Tuesday session, as EUR/USD is currently trading at 1.1250. On the economic front, there are no major eurozone indicators. In the eurozone, indicators pointed to a slowdown in the retail sector. Retail PMI dipped to 52.0, down from 52.7 points. As well, Retail Sales dropped to 0.1%, down from the previous reading of 0.3%. This was short of the estimate of 0.2%. On a brighter note, Sentix Investor Confidence improved for a fourth straight month, with a reading of 28.4 points. This easily beat the estimate of 27.6 points. In the US, today’s key event is JOLTS Job Openings, which is expected to drop to 5.65 million.
The markets are keeping a close eye on the ECB, as policymakers meet on Thursday for a policy meeting. The central bank has held the benchmark rate at a flat 0.0% since March 2016, and no change is expected at the upcoming meeting. Still, the markets would like to see the ECB acknowledge a stronger eurozone economy, and will be looking for a more hawkish tone from the rate statement and follow-up comments from ECB head Mario Draghi. The ECB has been cautious and is not expected to taper its asset-purchase program, which winds up in December. Still, any hawkish nuances in the rate statement or Draghi’s comments will be seized upon by the markets, and could push the euro upwards.
The Federal Reserve holds its policy meeting next week, and the markets are widely expecting the Fed to raise rates for the second time in 2017. On Monday, the odds of a rate increase stood at 96%, but the odds have dipped to 91%, in response to the dismal Nonfarm Payrolls report on Friday. An increase in interest rates represents a vote of confidence in the US economy, but the Fed continues to have some concerns. Inflation remains stubbornly low, despite a labor market that remains close to capacity. Fed policy makers are also scratching their heads over soft consumer spending, which has not kept pace with high levels of consumer confidence. As for additional rate hikes in the second half of 2017, the markets remain skeptical, with the odds of a September rate hike at just 22%. However, stronger data in the third quarter will likely raise the likelihood a September hike.
