EUR/USD – Stable as Markets Eye German CPI

EUR/USD is steady on Friday, as the pair trades in the low-1.36 range in the European session. It's been a quiet week for the euro, which has spent most of the week close to the 1.36 line. On the release front, French Consumer Spending climbed to a six-month high. Spanish CPI missed the estimate, and later in the day, Germany releases Preliminary CPI, a key event. In the US, today's highlight is Revised UoM Consumer Sentiment, with the markets expecting another strong reading in May.

The euro showed little response to US Unemployment Claims, which has not shown much movement in the month of June. The key indicator came in at 312 thousand, slightly better than the estimate of 314 thousand. Earlier in the week, GDP shocked the markets with a five-year low and durables softened as well. GDP dropped by 2.9%, much worse than the 1.8% loss expected by the markets. Core Durable Goods Orders declined by 0.1%, its first decline in five months. The estimate stood at 0.3%. Durable Goods Orders looked even worse, coming in at -1.0%, shy of the estimate of -0.1%.

In Germany, Consumer Climate looked sharp, as the key indicator jumped to 8.9 points, after spending the past four months stuck at 8.5 points. The estimate stood at 8.6 points. This strong reading comes on the heels of German Ifo Business Climate, which lost ground for a second straight month, dipping below the 110 line for the first time since December. As the largest economy in the Eurozone, German releases are closely watched by the markets, and key German data can affect the movement of EUR/USD.

Eurozone PMIs are key indicators of growth in the services and manufacturing sectors, and across the board, the May numbers were a disappointment. The German and Eurozone figures remained above the 50-point level, pointing to expansion. However, the French figures remained below the 50 mark, pointing to continuing contraction in the manufacturing and services sectors of the Eurozone's second largest economy. A worrying trend is that with the exception of Eurozone Services PMI, all of the PMIs posted their weakest reading in 2014. If Eurozone growth and inflation indicators don't show some improvement, we could see the ECB take further monetary action at its July policy meeting.

On Friday, Ukraine signed an association agreement with the EU, which strengthens economic and political ties between Ukraine and the EU. Earlier in the year, the decision by the Ukrainian president not to sign the deal led to widespread demonstrations and the installation of a new government in Kiev. Predictably, Russia is upset about the trade deal and has warned about consequences if its economic interests are harmed as a result of the agreement. The situation remains tense in eastern Ukraine, and a flare-up in violence could rattle the markets and affect the euro.

EUR/USD 1.3621 H: 1.3635 L: 1.3611