What you need to know before markets open:
- German political parties agreeing on outlines of the coalition agreement. The accord between Angela Merkel’s CDU/CSU and her former coalition partner SPD reached this morning opens the door for detailed negotiations in upcoming weeks and breaks German political uncertainty.
- New York Federal Reserve president William Dudley criticized the US tax reform that boosts short-term economic growth but poses risk to public finances and public debt.
Friday’s market moving events
- The US core retail sales are expected to rise 0.4% m/m in December.
- The US CPI is expected to decelerate to 2.1% y/y in December with core CPI set to remain at 1.7% y/y.
- German Bundesbank president Jens Weidmann is scheduled to speak at the Ludwig-Erhard summit, in Bavaria at 16:30 GMT.
Major market movers
- The EUR was boosted by German political development and rose to the highest level in more than 3-years against the US Dollar.
- The US Dollar index fell 0.5% to the lowest level since September 11 last year.
- The US Dollar awaits further impulses from US CPI and retail sales reports due later on Friday.
Earlier in Asia/Europe
- New York Federal Reserve Bank president William Dudley criticized the negative tax cuts that give a short-term boost to the economy but pose serious long-term risks to the US economic outlook as it can cause economic overheating while worsening fiscal position. Dudley expects US economy to rise 2.5%-2.75% due to tax stimulus with inflation rising in 2018.
- China’s trade balance reached an above expectations surplus of $54.7 billion in December with exports rising 10.9% and imports rising 4.5% in the US Dollar terms.
- German political parties reached a breakthrough agreement on outlines of future cooperation opening the way for coalition discussions.
- French inflation rose 0.3% over the month while decelerating to 1.2% y/y in December.
- Spanish inflation remained unchanged in December while rising 1.2% y/y on the harmonized basis.
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