EUR/USD is showing little movement in the Friday session. Currently, the pair is trading at 1.1404, up 0.14% on the day. In economic news, the eurozone current account surplus narrowed to EUR 20.3 billion, down from EUR 23.0 billion. This was well off the estimate of EUR 24.1 billion. In the U.S., today’s key event is UoM Consumer Sentiment. The indicator has slowed over the past three months, and the downward trend is expected to continue, with an estimate of 97.0 points.
The eurozone economy has softened in recent months, although the economy grew in 2018. The U.S-China trade war has taken a bite out of economic activity, and the eurozone export and manufacturing sectors have slowed. Germany, the largest economy in the bloc, has also been affected and growth for 2019 has been revised downwards. If the trade war continues or the U.S. economy slows down in 2019, the eurozone could lapse into a recession. Bottom line? The ECB, which finally terminated its massive stimulus program last month, is unlikely to raise rates before the fourth quarter of 2019. Just a few months ago, analysts were predicting a rate hike in the third quarter. This means that the euro will have to contend against the dollar without the benefit of higher rates, which would make the euro more attractive to investors.
With the eurozone growth down, there are plenty of headaches for ECB policymakers. ECB President Mario Draghi shared some of his concerns on Tuesday, at a plenary session on the ECB annual report. Draghi highlighted Brexit and the U.S-China trade war as significant concerns and noted that eurozone economic conditions have been weaker than expected, adding that the eurozone was undergoing a slowdown but was not heading into recession. The ECB holds its next policy meeting on January 24, with no change in monetary policy expected.
