EUR/USD started the week with slight losses, but has steadied on Wednesday. Currently, the pair is trading at 1.1203, up 0.01% on the day. On the release front, first-quarter GDP reports for Germany and the eurozone matched their forecasts. The U.S. will release consumer spending reports for July, with the markets braced for weaker numbers. Retail sales is projected slow to 0.2%, down from 1.6% in the previous release. Core retail sales is projected to drop to 0.7%, compared to 1.2% in March. On Thursday, the eurozone releases trade balance, while the U.S. posts building permits, unemployment claims and the Philly Fed Manufacturing Index.
There was positive news from first-quarter GDP data in the eurozone. German Preliminary GDP improved to 0.4%, after a flat zero reading in the third quarter. In the eurozone, Flash GDP also climbed to 0.4%, up from 0.2% in Q1. Is the economic slowdown over in the eurozone? It’s too early to tell, but if key indicators follow suit and head upwards, sentiment towards the eurozone will improve and likely boost the euro.
On Tuesday, ZEW economic sentiment surveys for Germany and the eurozone missed the mark, as both posted declines. The German release ended a long streak of declines in April, with a gain of 3.1. The indicator slipped to 2.1 in May, pointing to pessimism. Eurozone ZEW economic sentiment posted a decline of 1.6 in May, after a score of 4.5 in April. The ZEW surveys indicate that institutional investors and analysts are pessimistic about the economic outlooks for the eurozone and Germany. The manufacturing sectors have been particularly weakened, as the trade war between China and the U.S. has escalated with another round of tariffs between the sides. The U.S. has raised tariffs on $200 billion in Chinese goods, and the next step could mean tariffs on European vehicles which are produced in China. This could spell trouble for the massive European auto industry, as the tariffs would raise the prices of German and French vehicles.
