EUR/USD has stabilized on Friday, as the pair trades in the low-1.12 range in the European session. The euro took a dive on Thursday in response to better-than-expected US durables data. Durable Goods Orders jumped 2.8%, while Core Durable Goods improved to 0.3%. Friday is busy on the release front. In the Eurozone, today’s highlight is German Preliminary CPI, with the markets expecting a respectable gain of 0.6%. The US will release its second estimate of GDP for Q4, with a forecast of 2.1%. This is lower than the initial estimate of 2.6% in January.
It had been an uneventful week for EUR/USD, but that all changed on Thursday, as the euro shed 160 points following strong US durables data. Durable Goods Orders led the way with an excellent gain of 2.8%, easily beating the forecast of 1.7%. Core Durable Goods broke a string of four straight declines, posting a gain of 0.3%. However, this fell short of the estimate of 0.6%.
Greece and its international creditors have agreed to extend the bailout agreement after Greece’s list of economic reforms was accepted by the country’s creditors on Tuesday. Under this agreement, the Greek government has promised to continue with privatization plans and to meet budget targets. Still, the extension is a stop-gap measure and with sharp differences remaining between Greece and its creditors, the bailout crisis is far from over. If Greece and Germany again lock horns and raise doubts about whether Greece will remain in the Eurozone, we could see the euro lose ground.
Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall, but wages and inflation need to move higher before the Fed raises interest rates.
EUR/USD 1.1221 H: 1.1231 L: 1.1196
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