EUR/USD – Euro Unchanged as German, Eurozone GDP Meet Expectations

EUR/USD is almost unchanged in the Tuesday session. Currently, the pair is trading at 1.1927, unchanged on the day. On the release front, German Preliminary GDP came in at 0.3%, close to the forecast of 0.4%. Eurozone GDP came in at 0.4%, matching the forecast. German ZEW Economic Sentiment came in at -8.2, weaker than the estimate of -8.0 points. Eurozone ZEW Economic Sentiment was stronger, improving to 2.4 points. This beat the estimate of 2.0 points. In the US, the focus will be on consumer spending indicators. Retail Sales is expected to dip to 0.4%, while Core Retail Sales is expected to post a gain of 0.5%.

First-quarter eurozone and German GDP data were within expectations, but investors should not become too sanguine, as the numbers pointed to a slowdown in the eurozone economy. Both Germany and the eurozone posted gains of 0.6% in the fourth quarter of 2017. Will economic conditions improve in Q2? Institutional analysts don’t seem optimistic, according to the well-respected ZEW Economic Sentiment surveys. The German indicator posted a sharp drop of -8.2 for a second straight month – the first declines since July 2016. The eurozone release improved to 2.4, but low reading certainly doesn’t show much optimism. The markets are bracing for more soft numbers on Wednesday, as Germany and eurozone release CPI reports. If these indicators miss their estimates, the euro could lose ground.

With the U.S economy performing well in 2018, the U.S consumer is feeling very optimistic. On Friday, the UoM Consumer Sentiment improved to 98.8 in April, beating the estimate of 98.4 points. The U.S labor market is at near or full employment, which has resulted in a slowdown in job growth due to a shortage of skilled workers. This was underscored last week, as JOLTS Job Openings climbed to a record 6.6 million. At the same time, inflation levels remain low, as the Federal Reserve target of 2 percent remains elusive. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. Inflation levels will be an important factor for the Fed in its monetary policy projection, which remains at two more hikes in 2018. The odds of a rate hike at the June hike stands close to 100%.

Yields in focus, again

Rate Differentials and Trade Fears Handcuff Capital Markets

EUR/USD Fundamentals

Tuesday (May 15)

• 2:00 German Preliminary GDP. Estimate 0.4%. Actual 0.3%
• 2:45 French Final CPI. Estimate 0.1%. Actual 0.2%
• 2:45 French Preliminary Private Payrolls. Estimate 0.4%. Actual 0.3%
• 5:00 Eurozone Flash GDP. Estimate 0.4%. Actual 0.4%
• 5:00 German ZEW Economic Sentiment. Estimate -8.0. Actual -8.2
• 5:00 Eurozone Industrial Production. Estimate 0.6%. Actual 0.5%
• 5:00 Eurozone ZEW Economic Sentiment. Estimate 2.0. Actual 2.4
• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US Retail Sales. Estimate 0.4%
• 8:30 US Empire State Manufacturing Index. Estimate 15.1
• 10:00 US Business Inventories. Estimate 0.2%
• 10:00 US NAHB Housing Market Index. Estimate 70
• 12:45 US FOMC Member John Williams
• 16:00 US TIC Long-Term Purchases

Wednesday (May 16)

• 14:00 German Final CPI. Estimate 0.0%
• 5:00 Eurozone Final CPI. Estimate 1.2%
• 8:00 ECB President Mario Draghi Speaks
• 8:30 US Building Permits. Estimate 1.35M
• 8:30 US Housing Starts. Estimate 1.33M

*All release times are DST

*Key events are in bold

EUR/USD for Tuesday, May 15, 2018

EUR/USD for May 15 at 5:55 DST

Open: 1.1928 High: 1.1939 Low: 1.1910 Close: 1.1927

EUR/USD Technical

EUR/USD inched lower in the Asian session and is showing limited movement in European trade

• 1.1915 was tested earlier in support and is a weak line
• 1.2025 is the next resistance line

Further levels in both directions:

• Below: 1.1915, 1.1809, 1.1718 and 1.1613
• Above: 1.2025, 1.2092 and 1.2235
• Current range: 1.1915 to 1.2025

OANDA’s Open Positions Ratio

EUR/USD ratio is showing movement towards short positions. Currently, long positions have a small majority (51%), indicative of a lack of trader bias towards EUR/USD.

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.