EUR/USD is trading comfortably above the 1.37 line in Friday trade. Taking a look at today’s releases, it’s a full day on both sides of the Atlantic. In the Eurozone, German Retail Sales jumped 2.5%, its best showing in almost a year. The Italian unemployment rate rose in January and was higher than the estimate. The markets are keeping a close eye on Eurozone Flash Estimate CPI, a key event. In the US, there are three key events - Preliminary GDP, Chicago PMI, and Pending Home Sales.
It’s been all smiles for German numbers this week. On Friday, Retail Sales jumped 2.5%, crushing the estimate of 1.2%. German GfK Consumer Climate continues to rise, as the key indicator moved upwards for a fourth straight month. Earlier in the week German Ifo Business Climate and Unemployment Change declined by 14 thousand, its third straight decline. With the ECB under pressure to take action and boost the sputtering Eurozone economy, good news from Germany, the largest economy in the bloc, is especially welcome. Meanwhile, the data out of other major Eurozone members was much worse. French Consumer Spending declined by 2.1%, its worst showing in almost two years, and well off the estimate of -0.8%. Italian Quarterly Unemployment jumped to 12.6%, up from 12.3% the month before. The estimate stood at 12.4%.
Federal Reserve Chair Janet Yellen testified on Thursday before a Senate committee. As expected, Yellen said that the Fed remains committed to tapering QE and would like to wind up the bond-buying scheme by the fall. At the same time, she acknowledged the string of weak US releases recently and said that the Fed would closely monitor to what extent the weak numbers are due to cold weather and what portion can be attributed to a “softer outlook”. The next Fed policy meeting takes place in mid-March and the markets will be expecting another $10 billion cut to QE.
Thursday was a mix for US key releases. Manufacturing data looked strong, as Core Durable Goods Orders jumped 1.1% in January. This surprised the markets, which had expected a decline of -0.1%. However, Unemployment Claims did not look as sharp, as the key indicator rose to 348 thousand, well above the estimate of 333 thousand. Meanwhile, a nasty streak of weak US releases ended on Wednesday as New Home Sales jumped by 468 thousand, crushing the estimate of 406 thousand. It was the housing indicator’s best showing since last June, and helped allay concerns about the health of the housing sector, following weak housing numbers last week. We’ll get another look at key housing data on Friday, with the release of Pending Home Sales. The markets anticipate a strong gain after a miserable reading in December.