The euro has steadied on Wednesday, after recording considerable gains in the Tuesday session. Currently, EUR/USD is trading at 1.1460. Earlier in the day, the pair climbed to 1.1489, its highest level since May 1. On the release front, German WPI improved to 0.0%, but fell short of the estimate of 0.2%. Later in the day, the eurozone releases Industrial Production. In the US, Federal Reserve Chair Janet Yellen will testify before the House Financial Services Committee. On Thursday, the US releases PPI and unemployment claims. As well, Janet Yellen will testify before the Senate Banking Committee.
Inflation levels remain a sore point in the eurozone, and Germany, the bloc’s largest economy, has not been immune to low inflation. The Wholesale Price Index declined 0.7% in May, its worst reading in 9 months. There was some improvement in the June report, with a flat reading of 0.0%. Still, German and eurozone inflations levels remain well below the ECB’s target of 2%, and as long as this situation continues, the ECB is unlikely to taper its aggressive stimulus package. We’ll get a look at German Final CPI on Thursday. The index has looked weak in the second quarter, and the estimate for June is 0.2%.
With Germany showing healthy growth and enjoying fiscal stability, the question of the fiscal stance of the eurozone as a whole was a key topic as eurozone finance ministers met in Brussels this week. Germany has opposed attempts to define the bloc’s fiscal stance as expansionary, and at the Monday meeting, the finance ministers agreed to aim for a”broadly neutral” stance. The European Commission wants to see France and Italy work on trimming their substantial deficits. As for Germany, which is in much better fiscal shape, the Eurogroup of finance ministers has called on the country to divert more resources to investment and public spending.
After a short hiatus, Washington is again abuzz over allegations of secret ties between Russia and the Trump administration during the US election. This week’s breaking news is the revelation that Donald Trump Jr. admitted that a Russian official contacted him and offered to provide him with evidence incriminating Hillary Clinton. Trump and the White House are trying to lower the flames and put a positive spin on the meeting, but the media and lawmakers (including Republicans) aren’t about to Trump off the hook. The crisis is just the latest miscue for the Trump administration, which hasn’t been able to pass any significant laws through Congress, even though Republicans control both the House of Representatives and the Senate. The latest dark cloud over the White House has dampened investor confidence, and the euro took advantage on Tuesday, climbing close to the 1.15 line.
