EUR/USD has steadied on Thursday trade, after a brief mid-week slide. The pair is trading at 1.1249, up 0.05% on the day. On the release front, the remainder of the week is busy. On Thursday, German releases Preliminary CPI. The U.S. publishes Final GDP and unemployment claims. On Friday, Germany releases retail sales, and the U.S. posts consumer spending and inflation data.
Germany and the eurozone are mired in an economic slowdown, which began in the second half of 2018 and shows no signs of ending anytime soon. The global trade war has dampened the demand for German and eurozone exports, and the manufacturing sectors have aslo been hurt. On Wednesday, ECB President Mario Draghi sounded pessimistic in his remarks about the economy. Draghi acknowledged that the economic slowdown which started in the second half of 2018 had extended into 2019. Draghi blamed uncertainty in the global economy, adding that “risks to the outlook remained tilted to the downside”. With weak conditions in the eurozone and Germany, the ECB is expected to remain dovish in its stance and keep a freeze on interest rates until 2020.
Global trade tensions have weighed on inflation levels in the developed economies, and the U.S. is no exception. However, with the Fed saying it will put a hold on rates until 2020, could that change? At the Fed policy meeting, policymakers lowered their inflation forecast for 2020, citing weakness in the Chinese and European economies. However, the chief economist of Credit Suisse, James Sweeney, has taken a different tack, saying that U.S. inflation could climb as high as 2.3% next year, in response to the lack of rate hikes. Sweeney said that although inflation remains below the Fed target of 2.0%, there are signs in the services sector of inflation picking up.
