It’s a quiet start to the week for the euro. In the European session, EUR/USD is trading at 1.1935, down 0.01% on the day. The euro had a relatively quiet week, within striking distance of the 1.20 line, which has psychological significance.
It’s a light day for economic events, with no tier-1 releases. German Import Prices for May improved to 1.7%, up from 1.4% beforehand and above the consensus of 1.4%. On an annualized basis, the gain of 11.8% was up from 10.3% and ahead of the forecast of 11.3%. The acceleration points to stronger economic activity in Germany, the largest economy in the eurozone.
Businesses optimistic, consumers less so
How is the German economy performing? The answer, it seems, depends on who you ask. Businesses seem optimistic, as German ifo Business Climate for May punched across the 100-level for the time in over two years. The reading coincides with a further reopening of the German economy as Covid-levels recede.
Consumers, on the other hand, are not sharing in the optimism of the business sector. Germany’s GfK Consumer Climate for June came in at -0.3. This was higher than the previous reading of -7.0 and above the forecast of -3.9, but still in negative territory. Consumer Climate hasn’t posted a gain since March 2020, when the Covid pandemic hit Germany and caused a massive economic downturn. Still, with conditions improving, it would not be surprising to see consumer confidence push into positive territory in the summer.
Inflation has been a buzzword for most major banks, as pent-up demand has finally been unleashed as economies reopen. ECB President Christine Lagarde stated last week that she does not expect the surge of inflation in the US to have any spillover in the eurozone. Lagarde said that the economy is improving as the Covid situation improves, but she expects inflation to remain subdued.
We’ll get a look at key inflation numbers on Tuesday, as Germany releases CPI for June. The consensus is a gain of 2.3% y/y, below the May reading of 2.5%.
EUR/USD Technical
- There is resistance at 1.1992 and 1.2047
- EUR has support at 1.1865. Below, there is support at 1.1793
