The euro is down slightly in the Friday session. Currently, EUR/USD is trading at 1.2048, down 0.17% on the day. On the release front, German Retail Sales sparkled, with a gain of 2.3%. This easily beat the estimate of 1.0%. Eurozone CPI Flash Estimate ticked lower to 1.4%, but matched the forecast. In the US, the focus remains on job data, with the release of Average Hourly Earnings and Nonfarm Payrolls. Wage growth is expected to gain 0.3%, but the markets are braced for a slowdown in Nonfarm Payrolls, with an estimate of 190 thousand. We’ll also get a look at ISM Non-Manufacturing PMI, which is expected to edge up to 57.6 points.
German numbers from December continue to impress the markets. Retail Sales soared 2.3%, its fastest pace since October 2016. Services and Manufacturing PMIs improved and continue to point to strong expansion. The labor market remains robust, as unemployment rolls dropped sharply. The economy hasn’t missed a beat, despite an uncertain political landscape in the eurozone’s largest economy. President Angela Merkel is now looking at the Social Democrats to help her make a new government, and preliminary talks are scheduled to begin on Sunday. The negotiations are likely to be lengthy, and strong disagreements on immigration policy and taxation could unravel the talks, which would trigger new elections.
The highly-anticipated Federal Reserve minutes were released on Wednesday. The minutes provided details of the December policy meeting, where the Fed raised interest rates for a third time in 2018. The minutes were positive in tone, reflecting a robust US economy. Policymakers noted that economic activity was expanding at a “solid pace”, buoyed by improved consumer and business spending, as well as a stronger global economy. FOMC members revised upwards their projection for GDP in 2018, from 2.1% to 2.5%. The minutes noted that new tax reform is expected to raise economic growth, but the Fed is unsure on the impact of the new law in areas such as the labor market. As for inflation, Fed officials remain concerned that inflation levels are well below the target of 2%, and this trend could continue.
