EUR/USD has ticked higher in the Monday session. Currently, the pair is trading at 1.2295, up 0.05% on the day. On the release front, the Eurozone trade surplus fell to EUR 19.9 billion, missing the estimate of EUR 22.6 billion. This marked a 3-month low. There are no US events on the schedule. On Tuesday, Germany releases PPI and ZEW Economic Sentiment.
On Friday, US numbers were mixed, and EUR/USD showed limited movement. Construction data disappointed, as Building Permits dropped to 1.30 million, shy of the estimate of 1.30 million. Housing Starts followed a similar trend, falling to 1.24 million and missing the forecast of 1.29 million. There was better news from consumer confidence, as UoM Consumer Sentiment improved to 102.0, beating the estimate of 99.3 points. This marked the first time that the indicator has been over the symbolic 100 level since October 2017.
The eurozone economy is enjoying a solid first quarter in 2018. A stronger global appetite has boosted exports and the manufacturing sector, while unemployment continues to drop. However, inflation, which has persistently hovered at low levels, continues to pose a problem for policymakers. In fact, Eurozone Final CPI has been dropping in recent months, and this worrisome trend continued on Friday, when the indicator dropped to 1.1%, down from 1.3% a month earlier. This marked the weakest gain since December 2016. ECB President Mario Draghi addressed inflation concerns last week, and sounded cautious. Draghi said that the ECB still needed to see evidence that inflation was gaining strength before there could be any talk about a change in monetary policy. In the meantime, Draghi said the ECB would remain “patient, persistent and prudent”. Stronger economic conditions have led to growing speculation that the ECB will wind up its stimulus program in September. However, there is still plenty of slack in the economy, and coupled with low inflation, Draghi can afford to remain cautious and maintain current monetary policy for some time.
