EUR/USD – Euro Subdued, German Inflation Beats Estimate

The euro is quiet in the Thursday session, as EUR/USD trades at 1.0880. On the release front, German WPI posted a gain of 0.3%, beating the estimate of 0.1%. The EU released its Spring 2017 Economic Forecast, which presented a generally optimistic picture of the economies of EU members. In the US, PPI is expected to show a slight gain of 0.2%, and unemployment claims is forecast to climb to 245 thousand. On Friday, Germany releases Preliminary GDP. It will be a busy day in the US, which will publish retail sales, CPI and consumer confidence.

The eurozone received its semi-annual report card on Thursday, as the European Commission released its Spring 2017 Economic Forecast. The report noted that the European economy is in its fifth year of recovery, and forecast eurozone GDP growth of 1.7% in 2017 and 1.8% in 2018. On the inflation front, the report stated that inflation had risen in recent months, but this was mainly due to an increase in oil prices. Still, inflation was expected to reach 1.6% in 2017 and 1.3% in 2018, compared to just 0.2% in 2016. Stronger growth has led to lower unemployment, and the report projected that eurozone unemployment rate would drop to 9.4% in 2017 and 8.9% in 2018. The report reiterated what ECB president Mario Draghi has long been saying, namely, that risks to the eurozone economy remain tilted to the downside. These risks include US economic and trade policy under President Trump, the banking sector in Europe and the UK’s exit from the EU. This forecast is considerably more optimistic than the Winter 2017 forecast, as is apparent from the captions in the press releases for these two reports: The Winter forecast was entitled “Navigating through choppy waters”, while the caption for the Spring forecast reads “Steady growth ahead”.

Donald Trump has been embroiled in a number of controversies in his short presidency, but the political earthquake he has now stirred could become political quicksand for the new president. Trump abruptly fired FBI director James Comey on Tuesday, stunning lawmakers on both sides of the aisle in Congress. Comey, who has been conducting an investigation into possible collusion between Trump and Russia during the presidential campaign, clearly has been a thorn in Trump’s side. The White House has claimed that it fired Comey over his handling of an email scandal involving Hillary Clinton, but the move has been roundly condemned by the Democrats, and some key Republicans have also voiced opposition as well. The firestorm could heat up further, with calls in Congress to appoint a special prosecutor into Trump’s connections with Russia. Has Trump gone one step to far? This latest controversy could cause some jitters among investors and hurt the US dollar.

EUR/USD Fundamentals

Thursday (May 11)

• 2:00 German WPI. Estimate 0.1%. Actual 0.3%
• 4:00 ECB Economic Bulletin
• 5:00 EU Economic Forecasts
• 6:25 FOMC Member William Dudley Speaks
• 8:30 US PPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 245K
• 8:30 US Core PPI. Estimate 0.2%
• 10:30 US Natural Gas Storage. Estimate 52B
• 13:01 US 30-y Bond Auction

Friday (May 12)

• 2:00 German Preliminary GDP. Estimate 0.6%
• 2:00 German Final CPI. Estimate 0.0%
• 2:45 French Preliminary Nonfarm Payrolls. Estimate 0.2%
• 5:00 Eurozone Industrial Production.Estimate 0.3%
• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US Retail Sales. Estimate 0.6%
• 9:00 US FOMC Member Charles Evans Speaks
• 12th-16th US Mortgage Delinquencies
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 97.0
• 10:00 US Business Inventories. Estimate 0.1%
• 10:00 US Preliminary UoM Inflation Expectations
• 12:30 US FOMC Member Patrick Harker Speaks

*All release times are EDT

*Key events are in bold

EUR/USD for Thursday, May 11, 2017

EUR/USD Thursday, May 11 at 5:00 EDT

Open: 1.0867 High: 1.0893 Low: 1.0863 Close: 1.0876

EUR/USD Technical

EUR/USD was flat in the Asian session and has edged higher in European trade but has retracted

• 1.0873 has switched to a support level
• 1.0985 is the next resistance line

Further levels in both directions:

• Below: 1.0873, 1.0708, 1.0616 and 1.0506
• Above: 1.0985, 1.1122 and 1.1242
• Current range: 1.0873 to 1.0985

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged in the Thursday session. Currently, long positions have a majority (59%), indicative of EUR/USD breaking out and  moving to lower ground.

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.