EUR/USD has posted slight losses in the Wednesday session. Currently the pair is trading at 1.1945, down 0.22% on the day. On the release front, German Preliminary CPI will be published later in the day, with the indicator expected to weaken and post a small gain of 0.1%. In the US, there are two key events – ADP Nonfarm Payrolls is expected to rise to 185 thousand, and Preliminary GDP is expected to gain 2.7%. On Thursday, Germany releases Retail Sales and the euro zone releases CPI Flash Estimate. In the US, there are a host of key events, led by unemployment claims.
It’s up, up and away for the streaking euro, which as soared 12.0% since April 1. On Tuesday, the currency pushed above the 1.20 level for the first time since January 2017. The euro has benefited from stronger growth in the eurozone in 2017, led by robust growth in Germany. As well, investors are anticipating that the ECB will provide some guidance on plans regarding its asset purchase program (QE), which is scheduled to terminate in December. The ECB is widely expected to taper its QE program early next year, but so far has been mum about its plans. Analysts expect the ECB to address its stimulus package at the next policy meeting on September 7.
Anyone hoping for some fireworks at last week’s meeting of central bankers in Jackson Hole came away disappointed. On Friday, ECB President Mario Draghi took a page out of Janet Yellen’s page book, opting to steer away from any discussion about ECB monetary policy. Instead, Draghi spoke about the importance of free trade and financial reforms. Draghi seems to have learned a lesson from a meeting of central bankers in Portugal in June, when the markets seized on his comments that the euro zone was undergoing a broad recovery, and the euro soared. However, Draghi won’t receive another free pass next month, when the ECB holds its next policy meeting, and is expected to address its ultra-accommodative monetary policy.
The US economy continues to perform well, and the economy receives a report card on Thursday, with the release of Preliminary GDP for the second quarter. US growth in Q1 was weak, with Final GDP coming in at 1.4%. However, Q2 is looking much better, with Preliminary GDP expected to gain 2.7%. The US consumer remains very optimistic about the economy, buoyed by a red-hot labor market. In August, CB Consumer Confidence accelerated to 122.9 in August, above the estimate of 120.9 points. Still, the optimism has not translated into strong consumer spending, and the lack of spending has contributed to weak inflation levels.
