EUR/USD has continued its impressive rally, with sharp gains on Thursday. In the European session, the pair is trading at 1.1484, up 0.82% on the day. On the release front, the eurozone current account surplus widened to EUR 23.0 billion, up from EUR 17.0 billion in the previous release. This beat the estimate of EUR 18.4 billion. In the U.S., the Philly Fed Manufacturing Index is expected to rise to 15.1, while jobless claims are forecast to increase to 216 thousand. On Friday, Germany and the eurozone release consumer confidence reports. It will be a busy day in the U.S., with the release of Final GDP, durable goods orders and consumer confidence.
The euro has climbed 1.5 percent this week, as EUR/USD trades at its highest level since early November. The dollar continues to sag, even after the Federal Reserve released a rate statement that was less dovish than expected. Most significantly, policymakers did not remove the critical phrase “further gradual increases” from their statement. At the same time, the dot plot forecast was lowered for 2019, from three rate rises to two. Just a few months ago, the markets were predicting a “rate hike every quarter” for 2019, but the Fed has made a U-turn in monetary policy, as policymakers respond to economic data which is pointing to slower growth.
The euro has received a boost from good news on the domestic front, as Italy and the EU announced on Wednesday that an agreement had been reached whereby Italy would lower its deficit target to 2.04%, down from its original target of 2.4%. For weeks, Italy and the EU had appeared to be on a collision course over the budget, with the EU threatening unprecedented sanctions against the Italian government. The deal sent Italian stocks higher on Wednesday and has also improved sentiment towards the euro.
