The EUR/USD is trading down .0027, or .24% at 1.1174. Volume is light and the price action is range bound. There were no economic releases from the Euro Zone today so the catalyst behind any movement and volatility is likely to be today’s U.S. Personal Spending and Personal Income reports.
The personal spending report is important because consumer spending accounts for a majority of overall economic activity. It’s one of the most important gauges of economic health due to the vast ripple effect consumer buying creates in the economy. Personal income is important because income is correlated with spending – the more disposable income consumers have, the more likely they are to increase spending.
The Fed wants to see personal income and personal spending increasing because it contributes to a healthy economy. Since the Fed’s interest rate decision will be data dependent. Reaching or exceeding the estimates could help drive the U.S. Dollar higher.
Traders will also be watching the Fed speakers for any clues that support an earlier than expected rate hike. Last week, hawkish comments by FOMC member Dennis Lockhart and Fed Chair Janet Yellen put pressure on the EUR/USD. Expect a similar reaction today if FOMC members Dudley, Evans and Williams present hawkish arguments. Dovish commentary will likely trigger a rally by the Forex pair and add to the uncertainty over the timing of the Fed rate hike.
Today’s bearish news from China seems to be weighing on the euphoria created by European Central Bank President Mario Draghi last week. In a prepared speech before the European Parliament’s Committee for Economic and Monetary Affairs, he said the ECB needed more time to assess whether to boost its stimulus program. Draghi added that the bank was ready to act but needed more evidence to see if the emerging market slowdown, the Euro’s strength and the fall in commodity prices would knock inflation from its projected path.
Perhaps traders are looking at today’s bearish Chinese data as a reason why the ECB will provide more stimulus in the future. This would be bearish for the EUR/USD.
Volume could be light this week ahead of the Euro Zone’s CPI Flash CPI estimate on Wednesday as well as a speech by Fed Chair Janet Yellen. CPI Flash CPI is expected to come out at 0.0%. Core CPI Flash Estimate is expected to show a reading of 0.9%. Late last week, Yellen said she anticipates a rate hike by the end of the year. This news pressured the Euro. This week she may clarify her assessment or even add more hawkish commentary.
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