EUR/USD has posted slight gains in the Thursday session. Currently the pair is trading at 1.1860, down 0.21% on the day. On the release front, German Retail Sales declined 1.2%, weaker than the estimate of -0.5%. Euro zone CPI Flash Estimate accelerated to 1.5%, edging above the forecast of 1.4%. In the US, unemployment claims are expected to rise slightly to 237 thousand. As well, Personal Spending is expected to improve to 0.4%. On Friday, the US releases key employment data. Average Hourly Earnings is expected to edge lower to 0.2%, and the markets are braced for Nonfarm Employment Change to drop to 180 thousand.
US numbers looked sharp on Wednesday, and the dollar responded with considerable gains against the euro. Preliminary GDP (second estimate) for the second quarter was revised to 3.0%, a marked improvement from the first estimate of 2.6%. Consumer confidence and spending remain strong and helped contribute to the strong GDP report, as the economy posted its strongest gain since the first quarter of 2015. However, solid consumer spending has failed to boost inflation, which continues to hover at low levels. The lack of inflation could hamper the Federal Reserve’s plans to raise interest rates, with the likelihood of a rate hike in December standing at just 35%. On the employment front, ADP Nonfarm Payrolls jumped to 237 thousand, marking a 3-month high. The official Nonfarm Payrolls report will be released on Friday, and if this indicator also beats the forecast, it would be a strong signal that the economic momentum has continued into the third quarter.
The euro has enjoyed a strong run against in the dollar in recent months, jumping 12.0% since April 1. On Tuesday, the currency pushed above the 1.20 level for the first time since January 2015. The euro has benefited from stronger growth in the eurozone in 2017, led by robust growth in Germany. As well, investors are anticipating that the ECB will provide some guidance on plans regarding its asset purchase program (QE), which is scheduled to terminate in December. The ECB is widely expected to taper its QE program early next year, but so far has been mum about its plans. ECB President Mario Draghi opted not to discuss monetary policy at last week’s meeting of central bankers at Jackson Hole, which has increased speculation that the issue will be addressed at the bank’s policy meeting on September 7.
