The euro has started off the trading week with considerable gains. Currently, EUR/USD is trading at 1.2280, up 0.66% on the day. In economic news, it’s a quiet start to the week. In the eurozone, the trade surplus climbed to EUR 22.5 billion, edging above the estimate of EUR 22.4 billion. In the US, banks and stock markets are closed for Martin Luther King Day, and there are no economic indicators on the schedule.
The euro continues to rally, as EUR/USD has climbed to its highest level since December 2014. On Friday, pair gained 1.4%, following reports from Germany that Angela Merkel’s conservative bloc and the Social Democrats have agreed on a coalition blueprint. This ends months of political uncertainty,which has eroded Merkel’s standing and also sidelined Germany on issues such as Brexit and political reform in the eurozone. Still, the talks are only in the preliminary stage, and further negotiations will be continuing in the coming weeks. Any coalition deal must be approved by all members of the Social Democrats camp, and this could present a challenge for party head Martin Shulz. The draft which Shulz and Merkel hammered out calls for an annual limit of 220,000 immigrants, and many Social Democrats oppose any cap on immigration.
The dollar lost ground on Friday, as US consumer data for December was lukewarm. CPI slowed to 0.1%, down from 0.4% a month earlier. Core CPI was stronger, improving to 0.3%. Both indicators were within expectations, but pointed to weak inflation levels. On the bright side, consumer spending remained strong. December retail sales buoyed by Christmas shopping, were up 5.4% compared to a year ago. Although investors were not impressed with the December data, as the euro rally continued, the spending numbers point to a strong finish for the economy in 2017.
