EUR/USD has posted slight losses in the Tuesday session, after starting the week with considerable gains. Currently, the pair is trading at 1.1455, down 0.17% on the day. On the release front, there are no major events. German industrial production produced a sharp decline of 1.9%. The U.S releases JOLTS Job Openings, which is expected to tick lower to 7.07 million. On Wednesday, the eurozone releases the unemployment rate and the Federal Reserve will publish the minutes of its December meeting, when it raised interest rates for the fourth time in 2018.
The U.S. dollar was broadly lower on Monday, as fallout from Fed Chair Powell’s recent remarks continue to weigh on the greenback. Powell engaged in some damage control, seeking to reassure the financial markets that was listening to market concerns about continuing to tighten policy. The markets had given Powell a thumbs-down after the Fed’s December rate statement was on the hawkish side, and stocks plummeted. Powell was dovish in his remarks, saying that he was aware of the risks of a slowdown in the U.S. economy and that the Fed would be patient in its policy decisions.
The Fed seems to be lowering expectations for additional rate hikes. Recent Fed forecasts have indicated two rate increases next year, but on Monday, Atlanta Fed President Raphael Bostic said that the economy would need only one rate hike. Some analysts have gone further, projecting a rate cut in 2019, which has put a chill on sentiment towards the U.S. dollar.
The German manufacturing sector has taken a hit due to ongoing global trade war, and this week’s manufacturing numbers are pointing to a slowdown. On Monday, Factory Orders fell 1.0%, well of the estimate of -0.2%. This was followed by a decline of 1.9% in Industrial Production, much weaker than the forecast of 0.3%. This marked the fifth decline in the past six months. Unless the ongoing trade war eases soon, we can expect German manufacturing data to struggle.
