The euro has inched lower in the Monday session. Currently, EUR/USD is trading just below the 1.12 line. On the release front, German Ifo Business Climate improved to 115.1, above the estimate of 114.6. Later in the day, ECB President Mario Draghi will speak at the ECB Forum on Central Banking in Portugal. In the US, today’s key event is Core Durable Goods Orders, which is expected to rebound and gain 0.4%. On Tuesday, Draghi will again address the ECB Forum event. The US will publish CB Consumer Confidence and Federal Reserve Chair Janet Yellen will deliver remarks at an event in London.
The German economy is performing well, and the business sector is full of optimism, according to a key survey released on Monday. Ifo Business Climate hit a record high in June, climbing to 115.1. The indicator has improved for five consecutive months, pointing to stronger optimism among German businesses. Ifo chief Clemens Fuest said that the German business sector was in a “jubilant” mood, and expected business conditions to continue to improve. Major economic institutes and the German central bank have revised upwards their forecast for German growth in 2017 and 2018. German GDP grew 0.6% in the first quarter, and has been the locomotive which has boosted growth in the eurozone. Analysts are closely monitoring how the ECB plans to respond to stronger economic conditions in the euro-area. So far, the central bank has dismissed calls to tighten monetary policy, saying that it will not make any moves until inflation moves closer to the ECB’s target of 2.0%. ECB President Mario Draghi will address the ECB Forum on Central Banking on Monday and Tuesday, and any hints about ECB monetary policy could move the euro.
There was positive news last week from the US construction industry. On Friday, New Home Sales jumped to 610 thousand, above the forecast of 599 thousand. Earlier in the week, Existing Home Sales improved to 5.62 million, beating the estimate of 5.54 million. There had been concerns about construction numbers, as Building Permits and Housing Starts both missed expectations in the May releases. Later in the week, the economy receives a report card, with the release of Final GDP for the first quarter. Preliminary GDP, which was released in May, came in at 1.2%, and this is the forecast for Final GDP. Will weak inflation and consumer spending result in a weaker than expected GDP report? If so, the US dollar could be a casualty and lose ground against its rivals.
