EUR/USD – Euro Pauses After Downhill Ride, German CPI Next

The euro has steadied on Thursday, after three straight losing concessions this week. Currently, EUR/USD is trading at 1.1755, up 0.15% on the day. On the release front, German GfK Consumer Climate edged lower to 10.8, shy of the estimate of 11.0 points. Later in the day, Germany releases Preliminary CPI, which is expected to remain unchanged at 0.1%. In the US, all eyes will be on Final GDP, with a forecast of 3.0%. As well, unemployment claims are forecast to jump to 269 thousand. On Friday, Germany releases Retail Sales and Unemployment Change, while the eurozone will publish CPI Flash Estimate. The US will release Personal Spending and UoM Consumer  Sentiment.

German President Angela Merkel finds herself with a weaker hand following last week’s election, and she will likely have to make major concessions in order to form a coalition government. The most likely coalition is Merkel’s CDU, the pro-business FDP and the Greens. This is uncharted political territory, as Germany hasn’t had a 3-party coalition since the 1950s. However, Merkel, an experienced and astute politician, hasn’t wasted any time, and has already appointed her former finance minister, Wolfgang Schaeuble to president of parliament. This move clears the path for the FDP to join, as the party has insisted on the finance portfolio. The FDP is fiscally hawkish and against Germany continuing to finance weaker eurozone members, such as Greece. If the FDP does take part in the government, Merkel may have to shift away from her plans to further integrate the European Union.

What can we expect from the Federal Reserve with regard to interest rate policy? Fed policymakers remain divided on the hot issue of a third and final rate hike in 2017. Fed Chair Janet Yellen waded into the rate debate on Tuesday, as she sent out a surprisingly hawkish message to the markets. Yellen said that she favored gradual rate increases, and voiced confidence that inflation levels would move higher. She added that if the Federal Reserve did not continue to raise rates, the red-hot labor market could become overheated, potentially causing a recession. Yellen appeared to echo sentiments voiced by New York Fed President William Dudley, who made a strong case for raising rates on Monday. Dudley cited a soft US dollar and strong global growth as reasons why inflation would increase and also translate into stronger wage growth. Dudley said he expects inflation to reach the Fed’s target of 2 percent in the “medium term”, and predicted that the Fed would continue to gradually remove monetary accommodation. However, Chicago Fed President Charles Evans sent out a very different message, calling on the Fed to avoid another rate hike until wage and inflation levels moved higher. Evans said that inflation, which is running at around 1.4 percent, is too low, and wants to see “clear signs” that prices are moving higher before the Fed presses the rate trigger. For their part, the markets are more confident in a December move – the CME Group has pegged the odds of a December raise at 81%, while the odds were mired below 50% just a few weeks ago.

EUR/USD Fundamentals

Thursday (September 28)

• 2:00 German GfK Consumer Climate. Estimate 11.0. Actual 10.8
• All Day – German Preliminary CPI. Estimate 0.1%
• 3:00 Spanish Flash CPI. Estimate 1.8%. Actual 1.8%
• Tentative – Italian 10-year Bond Auction
• 8:30 US Final GDP. Estimate 3.0%
• 8:30 US Unemployment Claims. Estimate 269K
• 8:30 US Final GDP Price Index. Estimate 1.0%
• 8:30 US Goods Trade Balance. Estimate -65.0B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%
• 10:15 US FOMC Member Stanley Fischer Speaks
• 10:30 US Natural Gas Storage. Estimate 77B

Friday (September 29)

• 2:00 German Retail Sales. Estimate 0.5%
• 3:55 German Unemployment Change. Estimate -5K
• 5:00 Eurozone CPI Flash Estimate. Estimate 1.6%
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.2%
• 8:30 US Personal Spending. Estimate 0.1%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 95.3

*All release times are GMT

*Key events are in bold

EUR/USD for Thursday, September 28, 2017

EUR/USD Thursday, September 28 at 5:00 EDT

Open: 1.1745 High: 1.1772 Low: 1.1721 Close: 1.1761

EUR/USD Technical

EUR/USD ticked lower in the Asian session but has reversed directions and is moving higher in European trade

• 1.1712 is a support line
• 1.1876 is the next resistance line

Further levels in both directions:

• Below: 1.1712, 1.1611 and 1.1489
• Above: 1.1876, 1.1996, 1.2018 and 1.2108
• Current range: 1.1712 to 1.1876

OANDA’s Open Positions Ratio

EUR/USD ratio is showing a slight move towards long positions. Currently, short positions have a majority (62%), indicative of EUR/USD reversing directions and moving lower.

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.