EUR/USD – Euro Unchanged as Eurozone Inflation Within Expectations

The euro is showing little movement on Wednesday, as EUR/USD trades at 1.1150. On the release front, it’s a very busy day in Europe and the US. German numbers were sharp, as Retail Sales and Unemployment Change easily beat expectations. Eurozone CPI posted a small gain of 0.2%, close to the estimate of 0.3%. In the US, we’ll get a look at two key indicators – ADP Nonfarm Employment Change and Pending Home Sales. On Thursday, the US releases unemployment claims and the ISM Manufacturing PMI.

Inflation in the Eurozone remains weak, although this week’s releases were close to the estimates, so the euro showed little reaction. German Preliminary CPI dropped to a flat 0.0% in August, down from 0.3% a month earlier. This was close to the forecast of 0.1%. Eurozone CPI remained steady at 0.2%, shy of the estimate of 0.3%. These soft numbers will add pressure on the ECB to adopt further monetary easing at its policy meeting on September 7. Meanwhile, German consumer spending and jobless numbers impressed in July. Retail Sales sparkled, jumping 1.7%, its strongest reading in over a year. Employment Change was unchanged at -7 thousand, beating the forecast of -2 thousand.

Will she or won’t she? The markets are again talking rate hike, following an upbeat speech from Fed chair Janet Yellen on Friday at the Jackson Hole summit. Yellen’s message to the markets was refreshingly clear, as she said that the case for a rate increase had “strengthened in recent months”. Yellen noted that the key economic indicators were performing well – the labor market was approaching maximum employment, inflation was steady, and consumer spending remained solid. Still, Yellen did not provide any timeline on a rate hike nor did she spell out what the Fed wants to see before pressing the rate trigger. On Friday, Fed members Dennis Lockhart and Stanley Fischer both came out in favor of two rate hikes in 2016, and these comments helped the dollar record broad gains on Friday. The Fed’s stance has raised the odds of a rate move according to the CME Group FedWatch tool, with a September hike priced at 30% in September and 57% for a December hike. However, given that any move by the Fed will be data-dependent, US numbers ahead of the Fed policy meeting on September 21 could significantly change the rate outlook.

EUR/USD Fundamentals

Wednesday (August 31)

• 6:00 German Retail Sales. Estimate 0.5%. Actual 1.7%
• 6:45 French Consumer Spending. Estimate +0.3%. Actual -0.2%
• 6:45 French Preliminary CPI. Estimate 0.4%. Actual 0.3% 
• 7:55 German Unemployment Change. Estimate -2K. Actual -7K
• 8:00 Italian Monthly Unemployment Rate. Estimate 11.5%. Actual 11.4% 
• 9:00 Eurozone CPI Flash Estimate. Estimate 0.3%. Actual 0.2%
• 9:00 Eurozone Core CPI Flash Estimate. Estimate 0.9%. Actual 0.8%
• 9:00 Italian Preliminary CPI. Estimate 0.1%. Actual 0.2%
• 9:00 Eurozone Unemployment Rate. Estimate 10.0%. Actual 10.1%
• 12:15 US ADP Non-Farm Employment Change. Estimate 174K
• 13:45 US Chicago PMI. Estimate 54.1
• 14:00 US Pending Home Sales. Estimate 0.7%
• 14:30 US Crude Oil Inventories. Estimate 1.1M

Thursday (September 1)

• 12:30 US Unemployment Claims. Estimate 265K
• 14:00 US ISM Manufacturing PMI. Estimate 52.0

*All release times are EDT

* Key events are in bold

EUR/USD for Wednesday, August 31, 2016

EUR/USD August 31 at 9:45 GMT

Open: 1.1150 High: 1.1162 Low: 1.1128 Close: 1.1147

EUR/USD Technical

• EUR/USD posted small gains in the Asian session but has retracted in European trade
•  1.1054 is providing support
• 1.1150 is fluid and could see more action in the Wednesday session. Currently it is a weak resistance line

Further levels in both directions:

• Below: 1.1054, 1.0957 and 1.0821
• Above: 1.1150, 1.1278, 1.1376 and 1.1467
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is showing slight gains in long positions. Currently, short positions have a majority (54%), indicative of trader bias towards EUR/USD reversing directions and resuming its upward movement.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.