EUR/USD has posted slight gains in the Friday session, erasing the losses seen on Thursday. Currently, the pair is trading at 1.1705, up 0.23% on the day. On the release front, German Ifo Business Climate ticked higher to 102.2, above the estimate of 102.00 points. In the US, the focus is on durable goods reports. Core durable goods orders is expected to climb to 0.5%, but the markets are braced for a decline of 1.3% from durable good orders. If the latter indicator does record a sharp decline, the dollar could lose ground.
As Italy moves closer establishing a new government, the EU and investors are watching nervously. On Wednesday, President Sergio Mattarella handed a mandate to Giuseppe Conte to form a coalition. Conte is from the Five Star Movement, which plans to govern with the Lega Nord. Both parties are anti-establishment and euro-sceptic. Their platform includes increased deficit spending and a crackdown on immigration, two issues which could put Italy, the third largest economy in Europe, on a collision course with Brussels. Earlier in the week, ECB governing council member Ewald Nowotny admitted that the political situation in Italy had “created a lot of nervousness”, but that the new government would be judged on its actions.
The Federal Reserve released the minutes from its May meeting. In the minutes, some Fed policymakers said they favored removing the phrase that “the stance of monetary policy remains accommodative”. Not surprisingly, the minutes didn’t shed light on the Fed’s plans, saying that another rate hike would occur “soon”, on the assumption that the US economy continues to perform as expected. Still, a quarter-point rate hike in August is virtually a given, with the CME Group setting the odds of a hike at 95 percent. This would mark a second hike in 2018. After that? The Fed projection remains at three rates hikes in 2018, but some analysts are predicting four increases this year.
