The euro is showing little movement in the Thursday session. Currently, EUR/USD is trading at 1.1770, down 0.18% on the day. In the eurozone, Final CPI gained 1.4% and Core Final CPI gained 0.9%, as both readings matched the forecasts. In the US, there are two key events. Unemployment claims is expected to drop to 235 thousand, and the Philly Fed Market Index is expected to drop to 24.5 points. On Friday, ECB President Mario Draghi and German Buba President Jens Weidmann speaks at Frankfurt European Banking Congress. The US will release Building Permits and Housing Starts.
There were no surprises from key consumer spending and inflation data on Wednesday. CPI and Core CPI matched the forecasts, with gains of 0.1% and 0.2%, respectively. Consumer spending reports were a mix – retail sales gained 0.1%, shy of the estimate of 0.2%. Core Retail Sales came in at 0.2%, beating the forecast of 0.0%. The Federal Reserve would certainly like to see higher inflation numbers, which remain well below the Fed inflation target of 2.0%. Still, the markets are very bullish on additional rate hikes, as the odds of upcoming rate hikes continues to move higher. Currently, the likelihood of a rate hike in December stands at 96%, and a January raise is priced in at 94%.
Central banks do their best to avoid causing market volatility, which requires clear communication with the public and the markets. However, with bank policymakers making public statements on a daily basis, differences in opinion on future monetary policy or quantitative easing are bound to come up, and this can lead to market movement. Early in the week, Fed Chair Janet Yellen and ECB Mario Draghi participated at an ECB event which focused on communication with the markets. Yellen acknowledged that the FOMC committee of 19 members posed problems, as members did not always speak with a unified voice. Yellen admitted that this problem would not be solved anytime soon, saying it was ‘a work in progress’. To be fair, this is also an issue for the ECB, as the markets have on occasion reacted to comments from individual policymakers.
