EUR/USD is unchanged on Monday, following sharp losses in the Friday session. The pair is currently trading at 1.1050. It’s a quiet day on the release front, so EUR/USD could remain subdued during the Monday session. The sole Eurozone release is the German Buba monthly report. In the US, there are two minor indicators on the schedule, the NAHB Housing Market Index and TIC Long-Term Purchases. On Tuesday, we’ll get a look at German ZEW Economic Sentiment and US Building Permits.
The markets had plenty of US consumer indicators to sift through on Friday, and the numbers were a mixed bag. US consumer inflation reports posted small gains of 0.2%, as inflation levels remain soft. There was better news on the consumer spending front, as Core Retail Sales posted a strong gain of 0.7%, beating the estimate. The UoM Consumer Sentiment report dipped below the 90-point level for the first time in three months, and was short of expectations. The euro lost ground in response to the strong retail sales numbers and also following the news that the Turkish military had staged a coup and deposed President Recep Erdogan. However, the coup failed and thousands have been arrested as the government seeks to restore order.
The Eurozone continues to struggle with weak inflation levels. Final CPI was up 0.1% in June. This isn’t much to cheer about, but any gains are welcome, as this was only the second reading in positive territory in 2016. Final Core CPI, which excludes items such as food and alcohol, showed a respectable gain of 0.9%. German inflation numbers dipped in June, although they managed to meet market expectations. German Final CPI gained just 0.1%, down from 0.3% in the previous release. German WPI climbed 0.6%, compared to 0.9% in the May report. With inflation mired at low levels, the ECB is under pressure to adopt further monetary easing, but even this may not be enough to kick-start a languishing economy. The ECB will hold a policy meeting on Thursday, with the benchmark rate expected to remain at a flat 0.00%.
In Britain, there were key financial and political developments last week. On Thursday, the BoE surprised the markets by staying put and not lowering interest rates. The markets had widely expected a quarter point cut from the BoE, which would have marked the first rate cut since July 2009. BoE Mark Carney had strongly hinted at the move when he recently stated that economic conditions had deteriorated and the BoE would need to lower rates in the summer, but Carney has evidently decided to wait. On the political front in Britain, Theresa May replaced David Cameron as Prime Minister. May was a strong supporter of the Remain camp, but she will now be mandated with presiding over Britain’s exit from the European Union. Although technically the government is not bound by the referendum vote, May has stated that the government fully intends to honor the vote. Britain’s departure could be a protracted and messy affair, especially as May has named Boris Johnson, leader of the “Leave” camp, as foreign minister. Johnson and EU leaders do not enjoy a good relationship, but all will have to behave and get to the tricky matter at hand – commencing negotiations over Britain’s departure and establishing a new trade relationship between the EU and its island neighbor.
Monday (July 18)
- 10:00 German Buba Monthly Report
- 14:00 US NAHB Housing Market Index. Estimate 60 points
- 20:00 US TIC Long-Term Purchases. Estimate 31.6B
Upcoming Key Releases
Tuesday (July 19)
- 9:00 German ZEW Economic Sentiment. Estimate 8.2 points
- 12:30 US Building Permits. Estimate 1.15M
* Key releases are in bold
*All release times are GMT
EUR/USD for Monday, July 18, 2016
EUR/USD July 18 at 9:00 GMT
Open: 1.1055 High: 1.1073 Low: 1.1045 Close: 1.1053
- EUR/USD has shown limited movement in the Asian and European sessions
- 1.1054 is fluid and was tested in support earlier. It could break during the Monday session
- There is strong resistance at 1.1150
Further levels in both directions:
- Below: 1.1054, 1.0925 and 1.0821
- Above: 1.1150, 1.1278, 1.1376 and 1.1495
- Current range: 1.1054 to 1.1150
OANDA’s Open Positions Ratio
EUR/USD ratio is showing movement towards short positions on Monday. Short positions retain a majority (56%), indicative of trader bias towards EUR/USD breaking out and moving to lower levels.