EUR/USD is flat on Tuesday, as the pair trades in the high-1.36 range in Tuesday's European session. On the release front, Eurozone PMIs were mixed, as Spanish Manufacturing PMI improved in June, but the Italian indicator weakened and missed the estimate. German Unemployment Change disappointed, rising for the second straight month. In the US, today's highlight is ISM Manufacturing PMI, with the markets expecting another strong reading for June.
Weak German data continues to be a concern. The week started with Retail Sales, the primary gauge of consumer spending, posting its third straight decline. The indicator came in at -0.6% last month, well off the forecast of +0.8%. Unemployment Change, which had posted strong declines in Q1, has reversed direction and recorded two straight gains, pointing to trouble in the employment sector. In June, the indicator came in at +9K, compared to an estimate of -9K.
Last 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.
In the US, the week started out in impressive style, as Pending Home Sales jumped 6.1%, crushing the estimate of 1.4%. This was the strongest gain since May 2013. US Housing numbers were excellent last month, as New Home Sales and Existing Home Sales both beat their estimates. Last week's dismal Q1 GDP reading has weighed on the US dollar, so the currency could lose even more ground to the pound if the markets aren't happy with this week's numbers.
EUR/USD 1.3684 H: 1.3694 L: 1.3678
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