It has been an uneventful week for the euro, and the trend continues in the Friday session. Currently, the pair is trading at 1.2478, down 0.21% on the day. On the release front, Eurozone PPI slowed to 0.2%, shy of the estimate of 0.4%. In the US, the focus is on employment reports. Wage growth is expected to edge downwards to 0.2%. The markets are forecasting that nonfarm payrolls will jump to 181 thousand. The unemployment rate is expected to remain pegged at 4.1%. We’ll also get a look at UoM Consumer Sentiment, which is expected to slow to 95.0 points.
With the eurozone economy continuing to perform well, there has been speculation that the ECB could wind up its asset-purchase program (QE) in September and shift to a normative policy, and perhaps raise interest rates. However, Mario Draghi and other ECB members have taken pains to reiterate that the Bank is in no rush to end QE. On Wednesday, executive board member Benoit Coeure joined the chorus, saying that although QE “will not last forever” policymakers were in agreement “that we have to be patient and prudent because we are not yet where we want to be in terms of inflation”. Investors would be well advised to keep a close eye on eurozone and German inflation numbers, as asset purchases could be extended beyond September if inflation remains well below the ECB target of around 2.0%.
There were no dramatic announcements from the Federal Reserve on Wednesday, and EUR/USD showed little movement in the Wednesday session. The Fed held the course on monetary policy, with the benchmark rate remaining between 1.25%-1.50%. In the rate statement, policymakers said that they expected the economy to continue to expand at a moderate pace and that the labor market would remain strong in 2018. What was more noteworthy was that the Fed predicted that inflation would rise to the Fed’s 2 percent target this year. This marks an upgrade in the inflation forecast, as the December statement said that inflation was expected to “remain somewhat below 2 percent.” Higher inflation is likely to open the door to tighter monetary policy, and the Fed appears on track for three or even four rate hikes in 2018, assuming that the US economy remains strong. This policy meeting was the last under Janet Yellen, as Jerome Powell will take over as Fed chair on February 3. The slightly hawkish tone of the rate statement has raised the odds of a rate hike to 83% when the Fed next meets in March.
Friday (February 2)
- 3:00 Spanish Unemployment Change. Estimate 50.3K. Actual 63.7
- 5:00 Eurozone PPI. Estimate 0.3%
- 5:00 Italian Preliminary CPI. Estimate 0.3%
- 8:30 US Average Hourly Earnings. Estimate 0.2%. Actual 0.2%.
- 8:30 US Nonfarm Employment Change. Estimate 181K. Actual 0.2%
- 8:30 US Unemployment Rate. Estimate 4.1%
- 10:00 US Revised UoM Consumer Sentiment. Estimate 95.0
- 10:00 US Factory Orders. Estimate 1.5%
- 10:00 US Revised UoM Inflation Expectations
- 14:30 US FOMC Member John Williams Speaks
*All release times are GMT
*Key events are in bold
EUR/USD for February 5, 2018
EUR/USD for February 5 at 4:50 EDT
Open: 1.2508 High: 1.2518 Low: 1.2476 Close: 1.2478
EUR/USD has posted small losses in the Asian and European sessions
- 1.2357 is providing support
- 1.2481 is under pressure in resistance. It could break during the Friday session
Further levels in both directions:
- Below: 1.2357, 1.2286, 1.2200 and 1.1961
- Above: 1.2481, 1.2569 and 1.2677
- Current range: 1.2357 to 1.2481
OANDA’s Open Positions Ratio
EUR/USD ratio is showing movement towards short positions. Currently, short positions have a majority (64%), indicative of EUR/USD continuing to move lower.