EUR/USD has posted slight gains in the Wednesday session. Currently, the pair is trading at 1.1453, up 0.11% on the day. On the release front, German and eurozone numbers were stronger than expected. German’s trade surplus jumped to EUR 19.0 billion, above the estimate of EUR 17.9 billion and hitting a 5-month high. As well, the yield on German 10-year bonds continues to fall, with a reading of just 0.29%, its lowest yield since June 2017. The eurozone unemployment rate unexpectedly fell to 7.9%, its lowest level since October 2008. In the U.S., today’s highlight is the FOMC minutes from the December meeting. On Thursday, the ECB releases the accounts of its December meeting. The U.S. will post unemployment claims and Federal Reserve Chair Powell speaks at an event in Washington.
The Federal Reserve will be in the spotlight, with the release of the FOMC minutes later on Monday. At the December policy meeting, the Fed raised rates by a quarter point, to a range between 2.25% and 2.50%. This ended a very aggressive 2018 for the Fed, which hiked rates four times. The December rate statement hinted that further rates were in the works for 2019, but a sharp drop in the stock markets has forced the Fed to adjust, and Fed Chair Powell was quite dovish in remarks last week, which were well received by investors. The Fed forecast is calling for two more hikes this year, but the markets are doubtful, with some analysts predicting a rate cut late in the year. It will be interesting to see the views of policymakers in the minutes and the reaction of the markets.
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. 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.
