After three losing sessions, EUR/USD has reversed course in the Wednesday session. Currently, EUR/USD is trading at 1.1993, up 0.47% on the day. On the release front, there are no German or eurozone indicators. French Industrial Production disappointed, posting a decline of 0.5%, edging below the estimate of -0.4%. In the US, today’s key event is Import Prices. On Thursday, the eurozone releases Industrial Production and the ECB will publish the minutes of the December policy meeting.
The unemployment rate in the eurozone declined steadily in 2017, and the December reading dropped to 8.7%. This marked its lowest level since March 2009, when the rate stood at 8.5%. This is yet another indication of the impressive rebound in the eurozone economy, as growth has been steady and the employment picture has improved. Retail Sales, the primary gauge of consumer spending, posted a strong gain of 1.5% in December, after a decline of 1.1% in November. The euro has received a boost from the strong numbers, gaining 2.7% since November 1. Fourth-quarter numbers have been solid, and the positive trend is expected to continue in early 2018.
When the Federal Reserve is in the headlines, it’s usually on the topic of interest rates. However, another important parameter is the Fed balance sheet, which has ballooned to $4.2 trillion. Starting this month, the Fed will reduce its portfolio, which grew tremendously during the financial crisis of 2008-2009. However, a strong US economy has allowed the Fed to begin trimming the balance sheet. Incoming Fed Chair Jerome Powell, who takes over in February, has estimated that the balance sheet could drop to anywhere between $2.4 trillion to $2.9 trillion after several years of cuts. Fed policymakers have not indicated a magic number for the balance sheet, but the cuts indicate a vote of confidence in the US economy.
