EUR/USD has posted strong gains in the Friday session. Currently, the pair is trading at 1.1637, up 0.58% on the day. On the release front, German retail sales plunged 2.1%, well off the estimate of -0.5%. Eurozone CPI Flash Estimate came in at 2.0%, matching the estimate. Core CPI Flash Estimate also matched expectations, with a gain of 1.0%. In the US, Core PCE Price Index is expected to remain pegged at 0.2% for a fourth straight month, while Personal Spending is forecast to drop to 0.4%. We’ll also get a look at UoM Consumer Confidence, which is forecast to rise to 99.1 points.
Early Friday, EU leaders announced with great fanfare that they had reached an agreement on the thorny issue of migrants and refugees. The issue had threatened to topple the German government, and countries such as Italy and Hungary were looking to drastically reduce immigration, putting them on a collision course with EU policy. Under the agreement, rescued migrants who are in EU territory will be sent to “control centers” in countries that agree to have them. The main entry point for refugees has been Italy and Greece, and under the agreement, other members will accept some of the migrants. Still, the deal was short on details, and appears to be a stopgap which papers over the deep divisions that still remain in the EU over immigration.
German retail sales resumed its losing ways in May. The sharp decline of 2.1% marked the fifth decline in the past six months and was the steepest drop in 2018. Inflation numbers have also raised concerns, as German Preliminary CPI fell to 0.1%, down from 0.5% a month earlier. Eurozone inflation numbers were stronger, as CPI Flash Estimate and Core CPI Flash Estimate both matched their estimates. Next week, Germany releases PMIs from the manufacturing and services sectors. These indicators have been dropping in recent months, and if this trend continues, the euro could lose ground.
