DAX jumps as bank, automaker shares sparkle

The DAX index has posted sharp gains in the Tuesday session. Currently, the DAX is at 12,715, up 1.33% on the day. On the release front, German and Eurozone manufacturing PMIs beat expectations, but services PMIs missed their forecasts. On Wednesday, German Ifo Business Climate is expected to dip to 101.6 points.

The EU and U.S have slapped tariffs on each other and a recent NATO summit exposed the frosty relations between President Trump and EU leaders. Still, there could be better news ahead, as EU President Jean-Paul Juckner meets with President Trump on Wednesday. If the talks show some progress, European equity markets could continue to move upwards. The DAX is up sharply on Tuesday, boosted by bank and automaker shares. Commerzbank has jumped 3.20%, Daimler is up 2.57%, BMW has climbed 2.07% and Volkswagen has risen 3.26%.

Eurozone and German manufacturing PMIs continue to point to expansion. The German release improved to 57.3, easily beating the estimate of 55.5, while the eurozone reading of 55.1 was above the forecast of 54.7. Both indicators had dropped over six consecutive months and the July releases put an end to that nasty streak. With the tariff war threatening to hurt German and eurozone exports, investors have been keeping a close eye on manufacturing data. Services PMIs were not as strong, as the German and eurozone releases missed their estimates.

  Commodities Weekly: Copper hovers near one-year low on global growth uncertainty

  U.S dollar boosted by higher Treasury yields

 

Economic Calendar

Tuesday (July 24)

  • 3:30 German Flash Manufacturing PMI. Estimate 55.5. Actual 57.3
  • 3:30 German Flash Services PMI. Estimate 54.6. Actual 54.4
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 54.7. Actual 55.1
  • 4:00 Eurozone Flash Services PMI. Estimate 55.0. Actual 54.4

Wednesday (July 25)

  • 4:00 German Ifo Business Climate. Estimate 101.6

*All release times are DST

*Key events are in bold

 

DAX, Tuesday, July 25 at 6:55 DST

Previous Close: 12,548 Open: 12,601 Low: 12,583 High: 12,746 Close: 12,715

EUR/USD – Euro shrugs off strong German, Eurozone manufacturing PMIs

EUR/USD is hugging the 1.17 line in the Tuesday session. Currently, the pair is trading at 1.1693, up 0.01% on the day. On the release front, German and Eurozone manufacturing PMIs beat expectations, but services PMIs missed their forecasts. There are no major U.S releases. On Wednesday, German Ifo Business Climate is expected to dip to 101.6 points and U.S New Home Sales is forecast to drop sharply to 671 thousand.

Eurozone and German manufacturing PMIs continue to point to expansion. The German release improved to 57.3, easily beating the estimate of 55.5, while the eurozone reading of 55.1 was above the forecast of 54.7. Both indicators had dropped over six consecutive months and the July releases put an end to that nasty streak. With the tariff war threatening to hurt German and eurozone exports, investors have been keeping a close eye on manufacturing data. Services PMIs were not as strong, as the German and eurozone releases missed their estimates.

The U.S. dollar has steadied this week, after broad losses on Friday. Investors reacted negatively to comments by President Trump which were critical of Federal Reserve monetary policy. On the weekend, Treasury Secretary Steven Mnuchin engaged in damage control, saying at the G-20 meeting that Trump was not interfering with the Fed policy of gradually raising rates. However, investors weren’t buying Mnuchin’s apologetics, and the U.S dollar continued to lose ground in Monday’s Asian session. There was more for investors to fret over, as Trump also attacked the EU and China for manipulating their currencies and keeping interest rates lower. This has raised concerns that the current global trade tensions could be followed by a currency war. Growing concerns over the dangers of the ongoing trade war were summed up in the final communiqué from the G-20 meeting in Argentina over the weekend, which noted that “heightened trade and geopolitical tensions pose an increased risk to global growth”.

  Commodities Weekly: Copper hovers near one-year low on global growth uncertainty

EUR/USD Fundamentals

Tuesday (July 24)

  • 3:00 French Flash Manufacturing PMI. Estimate 52.6. Actual 53.1
  • 3:00 French Flash Services PMI. Estimate 55.7. Actual 55.3
  • 3:30 German Flash Manufacturing PMI. Estimate 55.5. Actual 57.3
  • 3:30 German Flash Services PMI. Estimate 54.6. Actual 54.4
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 54.7. Actual 55.1
  • 4:00 Eurozone Flash Services PMI. Estimate 55.0. Actual 54.4
  • 9:00 US HPI. Estimate 0.4%
  • 9:45 US Flash Manufacturing PMI. Estimate 55.1
  • 9:45 US Flash Services PMI. Estimate 56.5
  • 10:00 US Richmond Manufacturing Index. Estimate 18

Wednesday (July 25)

  • 4:00 German Ifo Business Climate. Estimate 101.6
  • 10:00 US New Home Sales. Estimate 671K

*All release times are DST

*Key events are in bold

EUR/USD for Tuesday, July 24, 2018

EUR/USD for July 24 at 4:20 DST

Open: 1.1693 High: 1.1705 Low: 1.1655 Close: 1.1682

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1434 1.1553 1.1637 1.1728 1.1829 1.1910

EUR/USD was ticked lower in the Asian session and is showing stronger movement in European trade

  • 1.1637 is fluid. Currently, it is a weak support line
  • 1.1728 is  the next line of resistance

Further levels in both directions:

  • Below: 1.1553, 1.1434 and 1.1312
  • Above: 1.1637, 1.1728, 1829 and 1.1910
  • Current range: 1.1553 to 1.1637

Oil Could Hit $200 if War Breaks Out Between US and Iran

Military conflict between the United States and Iran would threaten to shut the world’s busiest seaway for oil exports and send crude prices to all-time highs, perhaps even to $200 a barrel, according to one analyst.

President Donald Trump on Sunday night warned Iranian President Hassan Rouhani on Twitter that his country would “SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE” if Rouhani ever threatened the United States again.


West Texas Intermediate graph

Trump appeared to be responding to comments over the weekend from Rouhani, who said, “Iran’s power is deterrent and we have no fight or war with anybody but the enemies must understand well that war with Iran is the mother of all wars,” according to an English translation on the Iranian president’s official website.

The rhetoric has been heating up as the first of two U.S.-imposed deadlines for international businesses to cut ties with Iran approaches next month. By November, the United States expects most oil buyers to reduce purchases of Iranian crude to zero, or else face U.S. sanctions.

In May, Trump pulled out of an international nuclear accord with Iran and restored sanctions against the nation, the world’s fifth biggest oil producer.

via CNBC

USD/CAD – Canadian dollar jumps after sharp retail sales reports

The Canadian dollar is almost unchanged in the Monday session, after strong gains on Friday. Currently, USD/CAD is trading at 1.3139, down 0.02% on the day. On the release front, it’s a quiet start to the week. Canadian Wholesale Sales jumped 1.2%, crushing the estimate of 0.6%. This marked the strongest gain since October. In the U.S, the sole indicator is Existing Home Sales, which is expected to rise to 5.46 million.

Canadian retail sales indicators for May sparkled on Friday, boosting the Canadian dollar 1.0 percent. Core Retail Sales jumped 1.4%, after failing to post a gain for three straight months. This easily beat the forecast of 0.6%. Retail Sales rebounded 2.0%, above the forecast of 1.0%. This follows a decline of 1.2% in April. Consumer inflation remained pegged at 0.1%, matching the forecast.

The U.S. dollar was broadly lower on Friday, after U.S President Trump made comments critical of Federal Reserve monetary policy. U.S presidents traditionally do not comment on moves by the Fed, but that did not prevent Trump from tweeting on Thursday that “tightening now hurts all that we have done”. On the weekend, Treasury Secretary Steven Mnuchin engaged in damage control, saying at the G-20 meeting that Trump was not interfering with the Fed policy of gradually raising rates. However, investors weren’t buying Mnuchin’s apologetics, and the U.S dollar continued to lose ground in Monday’s Asian session. There was more for investors to fret over, as Trump also attacked the EU and China for manipulating their currencies and keeping interest rates lower. This has raised concerns that the current global trade war could be followed by a currency war.

  Dollar weaker at the start of the week as G-20 comments on trade wars

 

USD/CAD Fundamentals

Monday (July 23)

  • 8:3o Canadian Wholesales Sales. Estimate 0.6%. Actual 1.4%
  • 10:00 US Existing Home Sales. Estimate 5.46M

*All release times are DST

*Key events are in bold

 

USD/CAD for Monday, July 23, 2018

USD/CAD, July 23 at 7:55 DST

Open: 1.3141 High: 1.3156 Low: 1.3114 Close: 1.3138

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2831 1.2970 1.3067 1.3160 1.3292 1.3436

In the Asian session, USD/CAD ticked lower but then gave up these gains. The pair has showed limited movement in European trade

  • 1.3067 is providing support
  • 1.3160 is under pressure in resistance
  • Current range: 1.3067 to 1.3160

Further levels in both directions:

  • Below: 1.3067, 1.2970 and 1.2831
  • Above: 1.3160, 1.3292, 1.3436 and 1.3530

DAX under pressure after Trump threatens currency war

The DAX index has posted losses in the Monday session. Currently, the DAX is at 12,510, down 0.41% on the day. On the release front, there are no key German or eurozone indicators. Eurozone Consumer Confidence, which hasn’t posted gains since January, is expected to dip to -1 point. On Tuesday, Germany and the eurozone will release service and manufacturing PMIs.

President Trump made waves on Friday, after attacking the Federal Reserve’s monetary policy and also taking shots at the EU. Trump criticized the EU and China for manipulating their currencies and keeping interest rates lower. The escalating trade war, which started with Trump slapping tariffs on China, the EU and other trading partners, has weighed on global equity markets. Investors now have a new concern, which is that Trump could once again show that he is not afraid to lock horns with the EU and China, and the result could be a global currency war.

Investors are keeping a close eye on the June service manufacturing PMIs for Germany and the eurozone, which will be released on Tuesday. The manufacturing PMIs have weakened for six straight months – will this continue in June? Although the PMIs continue to show expansion in Germany and the eurozone, the markets remain nervous that the escalating trade war is having a negative impact on the manufacturing sector. If the readings continue to head lower on Tuesday, European equity markets could respond with losses.

After years of monetary stimulus to boost the eurozone economy, the ECB is close to phasing out its asset-purchase program. The ECB plans to trim its monthly purchases from EUR 30 billion to 15 billion in September and wind up the program in December. Is a rate hike next on the menu? Any clues of a change in monetary policy are bound to affect the euro, as the ECB has not raised rates since 2011. Many analysts are predicting a rate hike in the second half of 2019. However, growing global trade tensions could put a wrinkle in plans to raise rates. The European Commission and the International Monetary Fund have lowered 2018 growth forecasts for the eurozone and for Germany. If the tariff slugfest continues, the markets could lose ground.

  Dollar weaker at the start of the week as G-20 comments on trade wars

Economic Calendar

Monday (July 23)

  • 6:00 German Buba Monthly Report
  • 10:00 Eurozone Consumer Confidence. Estimate -1

Tuesday (July 24)

  • 3:30 German Flash Manufacturing PMI. Estimate 55.5
  • 3:30 German Flash Services PMI. Estimate 54.6
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 54.7
  • 4:00 Eurozone Flash Services PMI. Estimate 55.0

*All release times are DST

*Key events are in bold

DAX, Friday, July 23 at 6:50 DST

Previous Close: 12,561 Open: 12,519 Low: 12,488 High: 12,564 Close: 12,510

EUR/USD – Euro pauses after strong gains following Trump comments

EUR/USD has posted slight losses in the Monday session after strong gains on Friday. Currently, the pair is trading at 1.1731, up 0.07% on the day. On the release front, it’s a quiet start to the week. Eurozone Consumer Confidence, which hasn’t posted gains since January, is expected to dip to -1 point. In the U.S, Existing Home Sales is forecast to climb to 5.46 million. On Tuesday, Germany and the eurozone will release service and manufacturing PMIs.

The dollar was broadly lower on Friday, after U.S President Trump made comments critical of Federal Reserve monetary policy. U.S presidents traditionally do not comment on moves by the Fed, but that did not prevent Trump from tweeting on Thursday that “tightening now hurts all that we have done”. On the weekend, Treasury Secretary Steven Mnuchin engaged in damage control, saying at the G-20 meeting that Trump was not interfering with the Fed policy of gradually raising rates. However, investors weren’t buying Mnuchin’s apologetics, and the U.S dollar continued to lose ground in Monday’s Asian session. There was more for investors to fret over, as Trump also attacked the EU and China for manipulating their currencies and keeping interest rates lower. This has raised concerns that the current global trade war could be followed by a currency war.

The euro posted marginal gains last week and continues to stay close to the 1.17 line. Traders should be prepared for some stronger movement in the Tuesday session, with the release of service and manufacturing PMIs for Germany and the eurozone. Both manufacturing PMIs have shown a troubling downward trend for the past six months – will this continue in June? Although the PMIs continue to show expansion in Germany and the eurozone, investors remain nervous that the escalating trade war is having a negative impact on the manufacturing sector. If the readings continue to head lower on Tuesday, the euro could lose ground.

  Dollar weaker at the start of the week as G-20 comments on trade wars

EUR/USD Fundamentals

Monday (July 23)

  • 6:00 German Buba Monthly Report
  • 10:00 Eurozone Consumer Confidence. Estimate -1
  • 10:00 US Existing Home Sales. Estimate 5.46M

Tuesday (July 24)

  • 3:00 French Flash Manufacturing PMI. Estimate 52.6
  • 3:00 French Flash Services PMI. Estimate 55.7
  • 3:30 German Flash Manufacturing PMI. Estimate 55.5
  • 3:30 German Flash Services PMI. Estimate 54.6
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 54.7
  • 4:00 Eurozone Flash Services PMI. Estimate 55.0

*All release times are DST

*Key events are in bold

EUR/USD for Monday, July 23, 2018

EUR/USD for July 23 at 4:55 DST

Open: 1.1725 High: 1.1750 Low: 1.1687 Close: 1.1695

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1434 1.1553 1.1637 1.1728 1.1829 1.1910

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

  • 1.1637 is fluid. Currently, it is a weak support line
  • 1.1728 is  the next line of resistance

Further levels in both directions:

  • Below: 1.1553, 1.1434 and 1.1312
  • Above: 1.1637, 1.1728, 1829 and 1.1910
  • Current range: 1.1553 to 1.1637

Dollar Rally Ends With Trump Monetary Policy and Currency War Comments

The USD fell against major pairs on Friday after US President Donald Trump tweeted that China and the EU manipulate their currency. Trade war escalation has reached a second phase at a time when American politics are having an identity crisis with the ongoing Russian interference during the 2016 elections. Steven Mnuchin will head to Buenos Aires to take part in the finance ministers G20 meeting with trade and monetary policies sure to be a topic of discussion. The European Central Bank (ECB) will announce its main refinancing rate on Thursday, July 26 at 7:45 am EDT with little expectations of a change. ECB President Mario Draghi will host a press conference at 8:30 am EDT with the market focused on his comments for insights into the monetary policy of the central bank.

  • US President worried about Fed’s monetary policy triggers currency war
  • European Central Bank meeting anticipated to be a quiet affair
  • Canadian inflation and retail sales beat expectations

EUR Rises Ahead of ECB as Currency War Concerns Rise

The EUR/USD gained 0.28 percent in the last week. The single currency is trading at 1.1717 after a volatile week is over. The EUR rose 0.73 percent on Friday as Trump’s comments on currency manipulation hit the newswires. The US dollar had fallen on Thursday after President Trump criticized the U.S. Federal Reserve for raising rates and eroding the competitiveness of American products.



In an interview with CNBC the US President said he was not thrilled with the path of interest rates, although he did mention that he would let them do what they feel is best. Earlier in the week Fed Chair Powell testified before the Senate Banking Committee and the House Financial Services Committee side-stepping any comments on trade spats.

The U.S. Federal Reserve has hiked two times already in 2018 leaving the benchmark rate at 175 to 200 basis points. The CME FedWatch tool shows a 86.9 percent chance of a September rate hike and 53.9 percent of a follow up in December. Both sets of probabilities where higher on Wednesday before Trump’s comments were released.

The economic calendar will not feature a large number of North American indicators with the main standout being the release of the first estimate of the US GDP data on Friday, July 27. Analysts forecast a rise of 4.1 percent and could serve as an antidote to Trump’s tweets. The European Central Bank (ECB) will feature on Thursday, but there is little expectation that new guidance will be provided after the June monetary policy meeting.

Loonie Higher on Strong Retail Sales and Inflation Data

The Canadian dollar rose on Friday after the release of retail sales and inflation data. The USD/CAD DROPPED 0.05 percent on a weekly basis. The currency pair is trading at 1.3146 after Canadian retail sales surprised with a 2 percent rise to a seven month high boosted by auto and gasoline sales on Friday. Inflation rose 2.5 on an annual basis in June also impacted by higher gasoline prices. The economic indicators validate the decision of the Bank of Canada (BoC) earlier this month to hike rates by 25 basis points and could further pressure the central bank to lift rates higher despite growing geopolitical headwinds.


Canadian dollar weekly graph July 16, 2018

The US dollar has been on a downward trend since President Trump issued some sharp criticism on the U.S. Federal Reserve monetary policy. The comments took the market by surprise as talking about the currency is not usually the job of the President, but rather the Treasury Secretary. The statements will most likely be discussed as the G20 meeting in Buenos Aires kicks off.

The US President continued to tweet about the unfair strength of the greenback which responded by falling more than 1 percent against the Canadian dollar.

Oil prices recovered from losses earlier in the week but West Texas Intermediate will finish below $70 after concerns about the increase in supply outstripping rising demand.

The GBP/USD dropped 0.76 percent in the last five days. The currency pari is trading at 1.3133 with political headwinds keeping the pound under pressure. The confusing Brexit strategy from the UK government could end up costing Prime Minister May her job as she scrambles to call an early summer recess to avoid challenge to her leadership.



The Bank of England (BoE) held rates unchanged in June, but there were three dissenters. The economic data could support an August rate hike by the central bank, but the question now is will MPC vote for higher rates holding to its mandate, but with a high possibility that Brexit negotiations once again threaten the growth of the UK economy and the reverse action is needed. The market still believes in an August rate hike, but the GBP will continue under pressure from political uncertainty at home and abroad.

Market events to watch this week:

Tuesday, July 24
9:30pm AUD CPI q/q
Wednesday, July 25
10:30am USD Crude Oil Inventories
Thursday, July 26
7:45am EUR Main Refinancing Rate
8:30am EUR ECB Press Conference
8:30am USD Core Durable Goods Orders m/m
Friday, July 27
8:30am USD Advance GDP q/q

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

GBP/USD – British pound higher despite higher UK deficit

The British pound has steadied on Friday, after posting losses for most of the week. In the North American session, the pair is trading at 1.3067, up 0.42% on the day. On the release front, Britain’s debt widened to GBP 4.5 billion, higher than the estimate of GBP 3.6 billion. There are no U.S indicators on the schedule.

Soft British indicators this week have weighed on the pound, which has declined 1.2% this week. Employment data was weaker than expected on Tuesday, and this was followed by a soft CPI release a day later. On Thursday, retail sales declined 0.5%, surprising the markets which had expected a gain of 0.1%. This marked the first decline since March. The weak numbers have dampened expectations that the BoE will raise interest rates at its August meeting. With the May government continuing to squabble over Brexit and negotiations with the EU at a standstill, the pound could face further headwinds and drop under the symbolic 1.30 level.

The tariff slugfest between the U.S and its major trading partners has raised serious concerns not just with investors, but with Federal Reserve policymakers as well. The Federal Reserve Beige Book for July, released on Wednesday, was rife with references to ‘tariffs’. This trend started in the April Beige Book after President Trump threatened in March to impose tariffs on China. Most of the twelve Fed regional districts referred to tariffs in their individual reports, which make up the Beige Book. Some Fed policymakers have also voiced their concern over the impact that tariffs could have on the U.S economy and is an issue the Fed will have to take into consideration, as it mulls over rate policy for the next six months.

  Yuan’s fall extends to a fourth straight day

 

GBP/USD Fundamentals

Friday (July 20)

  • 4:30 British Public Sector Net Borrowing. Estimate 4.5B. Actual 3.6B

*All release times are DST

*Key events are in bold

 

GBP/USD for Friday, July 20, 2018

GBP/USD July 20 at 8:50 DST

Open: 1.3013 High: 1.3070 Low: 1.2995 Close: 1.3062

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2706 1.2852 1.2996 1.3088 1.3186 1.3263

GBP/USD showed limited movement in the Asian and European sessions. The pair has edged higher in North American trade

  • 1.2996 was tested earlier in support
  • 1.3088 is under pressure in resistance, following gains by GBP/USD on Friday
  • Current range: 1.2996 to 1.3088

Further levels in both directions:

  • Below: 1.2996, 1.2852 and 1.2706
  • Above: 1.3088, 1.3186, 1.3263 and 1.3494

USD/CAD – Canadian dollar steadies ahead of key consumer data

The Canadian dollar has posted slight gains in the Friday session. Currently, USD/CAD is trading at 1.3240, down 0.22% on the day. On the release front, the focus is on consumer indicators. CPI is expected to remain pegged at 0.1%, while retail sales are expected at 0.6%, which would be the first gain in 2018. Traders should be prepared for movement from the Canadian dollar in the North American session. There are no US indicators on the schedule.

Bank of Canada policymakers will be keeping a close eye on Friday’s retail sales and inflation data. The Bank raised interest rates last month and said that further hikes could be on the way. An additional rate hike will be dependent on the strength of key indicators, as well as the fact that the Federal Reserve is likely to raise rates in September and perhaps December as well. With the Canadian dollar trading close to 13-month lows, BoC policymakers will have to raise rates or risk having the Canadian currency lose more ground due to interest rate differential with the United States.

  Yuan’s fall extends to a fourth straight day

The tariff slugfest between the U.S and its major trading partners has raised serious concerns not just with investors, but with Federal Reserve policymakers as well. The Federal Reserve Beige Book for July, released on Wednesday, was rife with references to ‘tariffs’. This trend started in the April Beige Book after President Trump threatened in March to impose tariffs on China. Most of the twelve Fed regional districts referred to tariffs in their individual reports, which make up the Beige Book. Some Fed policymakers have also voiced their concern over the impact that tariffs could have on the U.S economy and is an issue the Fed will have to take into consideration, as it mulls over rate policy for the next six months.

 

USD/CAD Fundamentals

Friday (July 20)

  • Tentative – OEPC-JMMC Meetings
  • 8:30 Canadian CPI. Estimate 0.1%
  • 8:30 Canadian Core Retail Sales. Estimate 0.6%
  • 8:30 Canadian Common CPI
  • 8:30 Canadian Median CPI
  • 8:30 Canadian Retail Sales. Estimate 1.0%
  • 8:30 Canadian Trimmed CPI
  • 8:30 Canadian Core CPI

*All release times are DST

*Key events are in bold

USD/CAD for Friday, July 20, 2018

USD/CAD, July 20 at 5:45 DST

Open: 1.3269 High: 1.3290 Low: 1.3245 Close: 1.3240

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2970 1.3067 1.3160 1.3292 1.3436 1.3530

In the Asian session, USD/CAD ticked upwards but then gave up these gains. The pair has posted small losses in European trade

  • 1.3160 is providing support
  • 1.3292 is the next resistance line
  • Current range: 1.3160 to 1.3292

Further levels in both directions:

  • Below: 1.3160, 1.3067, 1.2970 and 1.2831
  • Above: 1.3292, 1.3436 and 1.3530

DAX trading sideways as investors look for cues

The DAX index is almost unchanged in the Friday session. Currently, the DAX is at 12,679, down 0.06% on the day. On the release front, German PPI dipped to 0.3%, matching the estimate. The eurozone current account surplus dropped sharply to 22.4 billion. This was well short of the forecast of 27.2 billion and the lowest surplus since June 2017.

After years of monetary stimulus to boost the eurozone economy, the ECB is close to phasing out its asset-purchase program. The ECB plans to trim its monthly purchases from EUR 30 billion to 15 billion in September and wind up the program in December. Is a rate hike next on the menu? Any clues of a change in monetary policy are bound to affect the euro, as the ECB has not raised rates since 2011. Many analysts are predicting a rate hike in the second half of 2019. However, growing global trade tensions could put a wrinkle in plans to raise rates. The European Commission and the International Monetary Fund have lowered 2018 growth forecasts for the eurozone and for Germany. If the tariff slugfest continues, the euro will likely continue to lose ground.

The eurozone economy is in good shape and stronger growth has resulted in higher inflation levels. In June, euorozone CPI improved to 2.0%, reaching this symbolic level for the first time since February 2017. On an annualized basis, Final CPI also came in at 2.0%. If inflation levels continue to rise, there will be pressure on the ECB to consider raising interest rates, although this is an unlikely scenario before next year. The DAX has enjoyed a strong July, posting gains of 4.3%.

  Yuan’s fall extends to a fourth straight day

 

Economic Calendar

Friday (July 20)

  • 2:00 German PPI. Estimate 0.3%. Actual 0.3%
  • 4:00 Eurozone Current Account. Estimate 27.2B. Actual 22.4B

*All release times are DST

*Key events are in bold

 

DAX, Friday, July 20 at 5:10 DST

Previous Close: 12,686 Open: 12,662 Low: 12,638 High: 12,697 Close: 12,685