EUR/USD – Euro Steady as German ZEW Economic Sentiment Improves

EUR/USD has edged lower in the Tuesday session. Currently, the pair is trading at 1.0640. On the release front, German Final CPI improved to 0.6%, matching the forecast. German ZEW Economic Sentiment improved to 12.8 points, short of the estimate of 13.2 points. The Eurozone ZEW Economic Sentiment jumped to 25.6, beating the forecast of 19.3 points. In the US, we’ll get a look at PPI, with the index expected to post a small gain of 0.1%. Wednesday promises to be very busy, with the US releasing CPI and retail sales reports. As well, the Federal Reserve is widely expected to raise the benchmark rate to 0.75 percent. 

German data was in the spotlight on Tuesday. There was further indication that inflation continues to improve, as Final CPI rebounded with a gain of 0.6%, compared to a 0.6% decline a month earlier. The well-respected ZEW Economic Sentiment report improved to 1.28, although the markets had expected a stronger reading. Eurozone ZEW Economic Sentiment climbed to 25.6, its strongest gain since December 2015.

The euro posted considerable gains on Friday and remains close to the 1.07 line, as some ECB policymakers raised the possibility of higher interest rates at last week’s policy meeting. With growth and inflation showing signs of improvement, the ECB has been under pressure to tighten policy and reduce its asset-purchase program. Germany, in particular, is unhappy with the ECB’s ultra-loose policy and on Thursday, German Finance Minister Wolfgang Schaeuble bluntly stated that he wanted to see a “timely start to the exit” from the ECB’s asset-purchase scheme. For his part, Mario Draghi must balance the improved economy with upcoming elections in the Netherlands and France. Euro-skeptics are a strong force throughout Europe and Draghi is reluctant to make any major moves in the middle of heated political campaigns.

More job numbers out of the US, more good news for the economy. Nonfarm payrolls sparkled in February, as the indicator jumped to 235 thousand, easily beating the estimate of 196 thousand. Wage growth climbed 2.6% compared to February 2016, while the participation rate edged up to 63.0%, up from 62.9%. These numbers make it a virtual certainty that the Fed will raise rates by a quarter-point on Wednesday. Although a rate hike has been priced in by the markets at 93%, there have been disappointments in the past, so a rate move will likely give the dollar a boost against its major rivals, such as the euro. The solid job numbers also give President Trump a much-needed boost. Trump is under pressure to present an economic agenda, but the markets won’t mind giving him some additional breathing room with the economy performing well.

Only a Woeful Jobs Report Should Derail Fed Hike

EUR/USD Fundamentals

Tuesday (March 14)

• 3:00 German Final CPI. Estimate 0.6%. Actual 0.6%
• 6:00 German ZEW Economic Sentiment. Estimate 13.2. Actual 12.8
• 6:00 Eurozone ZEW Economic Sentiment. Estimate 19.3. Actual 25.6
• 6:00 Eurozone Industrial Production. Estimate 1.2%. Actual 0.9%
• 6:00 US NFIB Small Business Index.  Estimate 106.1. Actual 105.3
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Core PPI. Estimate 0.2%

Upcoming Key Events

Wednesday, March 15

• 8:30 US CPI. Estimate 0.0%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.1%
• 8:30 US Retail Sales.  Estimate 0.2%
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.00%
• 14:00 US FOMC Press Conference

*All release times are EST

*Key events are in bold

EUR/USD for Tuesday, March 14, 2017

EUR/USD March 14 at 7:00 EST

Open: 1.0651 High: 1.0663 Low: 1.0632 Close: 1.0636

EUR/USD Technical

EUR/USD was flat in the Asian session and has edged lower in European trade

• 1.0616 is providing support
• 1.0708 was tested in resistance earlier and is a weak line

Further levels in both directions:

• Below: 1.0616, 1.0506, 1.0414 and 1.0333
• Above: 1.0708, 1.0873 and 1.0985
• Current range: 1.0616 to 1.0708

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement in the Tuesday session. Currently, long positions have a majority (53%), indicative of trader bias towards EUR/USD reversing directions and moving higher.

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.