The euro has posted slight gains in the Friday session. Currently, EUR/USD is trading at 1.1866, up 0.13% on the day. On the release front, German Ifo Business Climate improved to 117.5, above the estimate of 116.6 points. There are no major events in the US.
The German economy continues to perform well, and there was more positive news on Thursday. German Final GDP in the third quarter accelerated to 0.8%, its strongest quarter since 2014. The manufacturing sector has looked sharp, and German Manufacturing PMI for November improved to 62.5, its highest level since 2010. At the same time, President Angela Merkel has failed to put together a coalition government, and another election could be the only way out of the political crisis. Will Merkel’s predicament have a negative effect on the German economy? In the short-term, the economy should be able to weather the crisis, but future growth could be in jeopardy if the political deadlock continues. The euro and German stock markets have remained steady since the coalition talks fell apart last week, indicating that investors remain upbeat about the German economy.
Federal Reserve policymakers remain upbeat about the U.S economy, according to the minutes of the most recent policy meeting. The minutes, released on Wednesday, indicated that policymakers expected the U.S economy to continue showing strong growth, and predicted that interest rates will be raised in the “near term”. The members discussed the vexing question of why inflation has been persistently low (no quick-fix solution was provided), with most agreeing that a tight labor market should lead to higher inflation levels. Although policymakers did not provide further hints about the timetable of a rate hike, the markets remain convinced that additional rates are imminent. The odds of a rate hike in December are 91%, and the odds a January raise are at 89%.
