The euro has posted gains in the Tuesday session, after posting small gains on Monday. Currently, the pair is trading at 1.2342, up 0.42% on the day. It’s another light day on the release front, with no major indicators. French Preliminary Payrolls edged up to 0.3%, beating the forecast of 0.2%. Wednesday will be busy on both sides of the pond. Germany and the eurozone will release GDP reports, and Germany will also publish Final CPI. The US will release CPI and retail sales indicators. Traders should be prepared for movement from EUR/USD during the Wednesday session.
ECB President Mario Draghi said last week that he is more confident that eurozone inflation is moving closer to the ECB target of just below 2 percent, due to improving economic growth. However, Draghi listed currency market volatility as an obstacle to the inflation target, and added that the ECB would carefully monitor the euro’s exchange rates. Draghi’s concerns about the exchange rate have been underscored by last week’s stock market turbulence, which boosted the dollar and sent the euro lower by 1.6 percent. The ECB tapered its massive stimulus program from EUR 60 billion to 30 billion/mth in January, and the markets are looking for hints as to whether the ECB will normalize policy and wind up stimulus in September.
It’s a quiet start to the week in the US, and the US dollar has been generally subdued. That will likely change on Wednesday, with the release of inflation and retail sales reports. The markets will be glued to the inflation indicators, as one of the catalysts for last week’s stock market slide was triggered by concern that higher inflation would lead to additional rate hikes from the Federal Reserve and other central banks. If inflation numbers are higher than expected, we could see some volatility in gold prices and further sell-offs in the stock markets.
