EUR/USD is stable on Tuesday, as the pair trades slightly above the 1.39 line in the European session. The markets are following fast-moving events in the Ukraine, as Crimea has voted to join Russia and the EU and the US have responded with limited sanctions. Turning to economic news, German ZEW Economic Sentiment looked awful, sliding to a ten-month low. The Eurozone indicator also slipped badly. As well, the German Constitutional Court confirmed the legality of the European Stability Mechanism. In the US, there are two major events on the schedule - Core CPI and Building Permits.
Events are moving quickly in the Ukrainian crisis. Voters in Crimea voted overwhelmingly to join Russia in Sunday's referendum, and Russian Prime Minister Putin has recognized Crimea as an independent state, paving the way for annexation. Putin will address a special session of the Russian parliament on Tuesday. The EU and US have responded with targeted sanctions, freezing assets of several high-ranking Russian officials. Additional sanctions are expected, possibly as early as this week.
US releases looked weak on Friday. PPI posted a decline for the first time since November, coming in at -0.1%. The estimate stood at +0.2%. Preliminary UoM Consumer Sentiment dropped below the 80-point level for the first time since November, slipping to 79.9 points. This was short of the estimate of 81.9 points. The weak PPI points to persistently low inflation numbers, which is indicative of an underperforming economy. Recent US numbers have certainly not dazzled, but they should be strong enough for the Federal Reserve to go ahead with another taper of QE. This would be the third trim of the Fed's asset-buying scheme, and would reduce QE to $55 billion per month. These tapers are dollar-positive and mark a vote of confidence in the US economy by the Federal Reserve.
The European Stability Mechanism, which is the Eurozone's bailout fund, was confirmed as legal by the German Federal Constitutional Court on Tuesday. Germany is the biggest contributor to the EUR 970 billion fund. In February, the court deferred a decision on the Outright Monetary Transactions, which is credited with saving weak members of the Eurozone, to the European Court of Justice.
EUR/USD 1.3898 H: 1.3938 L: 1.3890
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