The euro has started the week with little movement. Currently, EUR/USD is trading at 1.1934, up 0.01% on the day. On the release front, there are no eurozone events. In the US, the sole indicator is New Home Sales, which is expected to slow to 627 thousand. On Tuesday, the US releases CB Consumer Confidence, with an estimate of 123.9 points. We’ll also hear from Fed Chair Designate Jerome Powell and Treasury Secretary Steven Mnuchin.
German indicators continue to point upwards, and the week ended on a positive note, as German Ifo Business Climate in November set another record high. The indicator climbed to 117.5, above the estimate of 116.6 points. On Thursday, Final GDP in the third quarter accelerated to 0.8%, its strongest quarter since 2014. Manufacturing PMI surged to 62.5, pointing to strong expansion in the manufacturing sector. On the political front, there are renewed hopes that another election can be avoided, as the SPD (socialist democrats) have reluctantly agreed to hold coalition talks with Merkel’s conservative bloc. The SPD was the junior partner in the previous government, and is expected to come with a shopping list if it agrees to a “grand” coalition. This could mean more government spending and no cap on asylum seekers. The euro has not lost a stride since the political crisis, and on Friday, the currency pushed above 1.19 for the first time since late September.
Federal Reserve policymakers remain upbeat about the U.S economy, according to the minutes of the most recent policy meeting. The minutes indicated that policymakers expected the U.S economy to continue showing strong growth, and predicted that interest rates will be raised in the “near term”. The members discussed the vexing question of why inflation has been persistently low (no quick-fix solution was provided), with most agreeing that a tight labor market should lead to higher inflation levels. Although policymakers did not provide further hints about the timetable of a rate hike, the markets remain convinced that additional rates are imminent. The odds of a rate hike in December are 93%, and the odds of a January raise are at 91%.
