EUR/USD has posted slight gains in the Tuesday session, erasing the losses seen on Monday. In the European session, the pair is trading at 1.1431, down 0.17% on the day. On the release front, German PPI dipped to 0.3%, matching the estimate. In the U.S, the focus is on construction data. Building Permits is expected to improve to 1.26 million and Housing Permits is also forecast to rise to 1.23 million. On Wednesday, the U.S. releases durable goods orders, unemployment claims and consumer confidence.
The Federal Reserve remains on track to gradually raise rates in 2019, but the pace could be slower than anticipated just a few weeks ago. There’s no denying that the U.S economy is currently in great shape, with unemployment at historically low levels and the $1.5 trillion tax cut package boosting economic growth. However, the rosy picture could change next year. The U.S-China trade war is expected to take a bite out of U.S growth, and the stimulus from the tax cut will fade over time. GDP has been slowing on an annualized basis – from a sizzling 4.2% in the first quarter, to 3.5% in Q2, with Q3 expected at just 2.7%. The downward trend is expected to continue into 2019, with a growth forecast of 2.0% to 2.5%. If these forecasts materialize, the Fed could decide to raise rates more slowly next year. Many analysts had expected a hike of 25 basis points each quarter, but that could be revised lower to three rates next year. A December hike stands at 70 percent, down from 75% just one week ago. This has made the U.S dollar less attractive to investors and boosted the euro and other major currencies.
