The euro has shown some movement on Friday, but remains close to the 1.19 line. Currently, EUR/USD is trading at 1.1906, up 0.01% on the day. On the release front, the focus is on manufacturing data, with the release of PMIs in Europe and the US. The Eurozone Final Manufacturing PMI improved to 60.1, above the estimate of 60.0. German Final Manufacturing PMI climbed to 62.5, matching the forecast. Later in the day, the US releases ISM Manufacturing PMI, which is expected to dip to 58.4 points. We’ll also hear from FOMC members Robert Kaplan and Patrick Harker.
Manufacturing numbers in the eurozone and Germany continue to impress, as Manufacturing PMIs improved in October, with the eurozone indicator at 60.1 and the German indicator at 62.5 points. The German reading marked the highest since February 2011, while the eurozone release was the strongest since April 2000. The sparkling numbers underscore stronger global demand for European products, which have boosted the manufacturing and export sectors.
German retail sales remain problematic, and posted a sharp decline of 1.2% in October. This marked the third decline in four months. Germany’s economy is solid and the labor market is strong, so why isn’t the German consumer spending? Strong economic conditions have not translated into higher wages for a large segment of the labor force, and low unemployment numbers have masked the problem of underemployment, ,which of course means lower wages for workers who can’t find full-time work. The lack of inflation in Germany is apparent in the eurozone as well, as inflation levels remain below the ECB’s inflation target of around 2 percent.
All eyes are on Washington, as the Senate is set to vote on its version of tax reform. A vote was expected on Thursday night, but this has been delayed until Friday. Republican lawmakers are confident that they have the necessary votes to pass the bill, but with the vote expected along party lines, the results will be close. If the Senate does pass the bill, the stock markets and US dollar will likely respond with gains. The next step in the tax reform saga would be for the House and Senate to bridge the differences between the two bills and come up with a single version.
