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Euro Yawns As German CPI Matches Estimate

By Kenny FisherForexAug 11, 2017 06:16AM ET
www.investing.com/analysis/euro-yawns-as-german-cpi-matches-estimate-200206718
Euro Yawns As German CPI Matches Estimate
By Kenny Fisher   |  Aug 11, 2017 06:16AM ET
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EUR/USD continues to show little movement, as the pair has inched lower in Friday trade. Currently, the pair is trading at 1.1750, down 0.19% on the day. On the release front, German Final CPI improved to 0.4%, matching the forecast. German Final WPI was unable to keep pace, posting a decline of 0.1%, well below the forecast of 0.3%. In the US, the focus is on inflation numbers, with the release of CPI and Core CPI. Both key indicators are expected to post a small gain of 0.2%. We’ll also hear from two FOMC members, Dallas Fed President Robert Kaplan and Minneapolis Fed President Neel Kashkari.

Global markets remain jittery over rising tensions between North Korea and the US. With the war of words escalating between the two countries, global markets are down, as investors have dumped shares in favor of safe-haven assets, such as the Japanese yen and gold. North Korea has vowed to retaliate over new sanctions imposed by Washington and has threatened to attack Guam, which is a major US military base. President Trump and North Korean President Kim Jong-un are on a possible collision course, which has caused alarm in South Korea and Japan, strong allies of the US. The present situation is being compared to the Cuban Missile crisis, and although the likelihood of actual hostilities breaking out remain small, the crisis has reached levels where the markets cannot ignore it.

The ECB hasn’t said much about its asset purchases program (QE) in recent months, but that could change soon. In July, the bank said it would hold discussions on the scheme in “the autumn”, and analysts are split as to whether that means September or October. Either way, this means that the markets expect to hear shortly from the ECB that it will begin winding down its aggressive QE policy, given the stronger economic conditions in the euro zone. The bloc’s economy is forecast to expand a healthy 2.0% this year, and the eurozone outperformed both the US and the UK in the first half of 2017. The sore point remains inflation, which is stuck at low levels, despite the ECB’s ultra-accommodative monetary policy. Another factor which policymakers must deal with is the ECB’s bloated balance sheet, which stands at more than EUR 2 trillion. With the Federal Reserve expected to begin trimming its balance sheet as early as September, investors will be keeping a close eye on the ECB and the Fed once the summer is over.

The markets are looking for some clarity from the Federal Reserve, which is showing signs of backtracking on another rate hike in 2017. Earlier this year, the Fed strongly hinted that it planned to raise rates three times in this year, but so far has only pressed the rate trigger twice, in March and June. After the June hike, Fed Chair Janet Yellen shrugged off concerns over low inflation, saying that it was due to “transient” factors. However, inflation has not improved and the Fed has changed its tune. Last week, St. Louis Federal Reserve President James Bullard said he opposed further Fed hikes, warning that another hike would actually delay inflation from hitting the Fed’s target of 2%.

The Fed appears uncertain about when to raise rates, and predictably, this hesitancy is making investors skeptical that the Fed will act. There is little chance that the Fed will make any moves at the September and November meetings, and the odds of a rate hike in December are currently at 42%. Analysts are hoping for some insight into the Fed’s thinking when the Fed Reserve Dallas President Robert Kaplan and Minneapolis President Neel Kashkari deliver speeches on Friday.

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Demand for Bunds swells as Trump escalates N. Korea rhetoric

EUR/USD Fundamentals

Friday (August 11)

  • 2:00 German Final CPI. Estimate 0.4%. Actual 0.4%
  • 2:00 German WPI. Estimate +0.3%. Actual -0.1%
  • 2:45 French Final CPI. Estimate -0.3%
  • 2:45 French Preliminary Nonfarm Payrolls. Estimate 0.4%
  • 8:30 US CPI. Estimate 0.2%
  • 8:30 US Core CPI. Estimate 0.2%
  • 9:40 US FOMC Member Robert Kaplan Speaks
  • 11:30 US FOMC Member Neel Kashkari Speaks

*All release times are GMT

*Key events are in bold

EUR/USD for Friday, August 11, 2017

EUR/USD Chart
EUR/USD Chart

EUR/USD Friday, August 11 at 5:30 EDT

Open: 1.1773 High: 1.1780 Low: 1.1750 Close: 1.1750

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1534 1.1616 1.1712 1.1876 1.1996 1.2108

EUR/USD was flat in the Asian session and has inched lower in European trade

  • 1.1712 is under pressure in support and could break in Thursday trade
  • 1.1876 is the next resistance line

Further levels in both directions:

  • Below: 1.1712, 1.1616 and 1.1534
  • Above: 1.1876, 1.1996, 1.2108 and 1.2221
  • Current range: 1.1712 to 1.1876

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged this week. Currently, short positions have a majority (69%), indicative of EUR/USD continuing to move lower.

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Euro Yawns As German CPI Matches Estimate
 

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Euro Yawns As German CPI Matches Estimate

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