The euro is almost unchanged in the Tuesday session, after recording considerable losses on Monday. Currently, the pair is trading at 1.1962, up 0.06% on the day. On the release front, it’s a data-light day, with no eurozone events. In the US, today’s key event is JOLT Jobs Openings, which is expected to slow to 5.96 million. On Wednesday, the US releases PPI, with an estimate of 0.3%.
The US dollar suffered broad losses last week, as tensions rose in the Korean peninsula after North Korea tested a hydrogen bomb. This weighed on risk appetite, and the euro jumped on the bandwagon, gaining 1.3 percent against the greenback. With North Korea celebrating its 69th anniversary of independence, there were concerns that Pyongyang would use the occasion to flex some muscle and test a nuclear bomb or missile. North Korea marked last year’s anniversary by exploding its fifth nuclear test. There were no incidents over the weekend, although the US, along with its allies Japan and South Korea, remain on alert for further provocations from the north. The dollar responded with gains on Monday, as EUR/USD dipped below the symbolic 1.20 level.
The US economy has been performing well in the second quarter. Preliminary GDP came in at a sizzling 3.0%, and the labor market remains close to capacity. Still, the Achilles heel of the economy remains stubbornly low inflation levels. Wage pressure has been limited, despite the fact that many businesses cannot fill job openings. Weak inflation has hampered the Fed’s plans to raise interest rates a third time this year, and the odds of a December hike have dipped to just 31%, as the markets are increasingly doubtful that the Fed will make a move before next year. Will the inflation picture improve? We could see better numbers this week for August inflation – PPI is expected to improve to 0.3% on Tuesday, and the same gain is forecast for CPI on Wednesday. Both estimates are higher than the July readings.
