Friday’s trade saw EUR/USD within the range of 1.0800-1.0950. The pair closed at 1.0889, up 0.05% on a daily basis. It has also been the third gain in the past five trading days. The cross appreciated 0.62% for the whole week, marking a second consecutive week of gains.
At 7:42 GMT today EUR/USD was down 0.55% for the day to trade at 1.0830. The pair touched a daily low at 1.0822 at 7:35 GMT.
Fundamentals
Euro Area
Economic Sentiment Indicator (ESI)
The final value of the consumer confidence index probably confirmed the preliminary reading of -3.7, which was reported on March 23rd. If so, this would be the highest level of confidence since July 2007, when the indicator stood at -2.0. The final index for February came in at -6.7, or in line with the preliminary value. The indicator measures consumer confidence on a scale of -100 to +100. A reading of -100 suggests a lack of confidence, zero means neutrality and a reading of +100 indicates extreme levels of confidence. The index reflects the level of optimism, which consumers have about economic development in the region. The Business and Consumer Survey is conducted by phone and includes 23 000 households in the Euro area. The questions asked stress on current economic and financial situation, savings intention and also on expected developments regarding consumer price indexes, general economic situation and major purchases of durable goods. This indicator is one of the five major components, that comprise the Economic Sentiment Indicator (ESI).
The ESI probably continued to improve in March, reaching 103.1, according to market expectations, from a reading of 102.1 in February. If so, this would be the highest level since June 2011, when the index was reported at 105.4. The Economic Sentiment Indicator (ESI) is a composite indicator, consisting of five sectoral confidence indicators with different weights: Industrial confidence indicator, Services confidence indicator, Consumer confidence indicator, Construction confidence indicator and Retail trade confidence indicator. The ESI is calculated as an index with a mean value of 100.0 and standard deviation of 10 over a fixed standardized sample period.
Higher confidence usually implies greater willingness to spend, including large-ticket purchases, while consumer spending is a key factor behind economic growth. Therefore, in case the ESI climbed more than anticipated, this would cause a certain bullish impact on the common currency. The European Commission is expected to release the official ESI reading at 9:00 GMT.
German consumer inflation – preliminary estimate
German preliminary annualized consumer inflation probably accelerated to 0.3% during March, according to the median forecast by analysts. In February the final rate of inflation was reported at 0.1%, confirming the preliminary estimate, as prices of energy and food went down at a slower pace.
Energy costs plunged 7.3% year-on-year in February, as prices of heating oil plummeted 22.0% and prices of motor fuels dropped 12.7%. Prices of food and non-alcoholic beverages decreased 0.2% in February, following a 1.0% drop in January. Among services, in February higher prices were reported for net rents exclusive of heating expenses (+1.3%), passenger transport (+10.1%), hairdresser services and other services for personal care (+3.3%) and recreational and sporting services (+2.9%), according to data by Destatis. Cost of telecommunication services, on the other hand, continued to decline, down 1.1% year-on-year in the same month.
The Consumer Price Index (CPI) presents a general picture of the price change in the country, while encompassing all household types, all regions and all goods and services demanded (food, clothing, automobiles, rental, repair and hairdressing services etc). The index is based on a basket of goods and services, which is regularly renewed, so that goods and services, purchased more often by consumers, are included in the present survey.
The nations preliminary annualized CPI, evaluated in accordance with the harmonized methodology, probably rose 0.1% in March, after falling 0.1% in February and 0.5% in January. The harmonized methodology is used for the sake of consumer inflation comparison in an international context (member states in the Euro area). In case the annualized CPI improved more than expected and further approached the 2-percent inflation objective, set by the European Central Bank, this would certainly support demand for the euro. Destatis is scheduled to publish the CPI report at 12:00 GMT.
United States
Personal Income and Spending
Personal spending in the United States probably rose for the first time in the past three months in February, up 0.2%, according to market expectations, while personal income was probably up for a 14th consecutive month in February, increasing 0.3%. Spending dropped 0.2% in January. At the same time, personal income increased 0.3% during the same month, while disposable personal income (DPI) rose USD 52.6 billion (or 0.4%). Real DPI went up 0.9% in January, following a 0.5% gain in December. Private wages and salaries increased USD 39.7 billion in January, in comparison with an increase by USD 7.2 billion in December. Higher-than-expected rates of increase imply good employment conditions and, therefore, are dollar positive. The Bureau of Economic Analysis is to publish the official figures at 12:30 GMT.
Pending home sales
The index of pending home sales in the United States probably rose 0.5% during February compared to January, when sales surged 1.7%. The latter has been the largest monthly gain since July 2014, when a rate of 3.2% was recorded.
When a sales contract is accepted for a property, it is recorded as a pending home sale. As an indicator the index provides information on the number of future home sales, which are in the pipeline. It gathers data from real estate agents and brokers at the point of a sale of contract and is currently the most accurate indicator regarding US housing sector. It samples over 20% of the market. In addition, over 80% of pending house sales are converted to actual home sales within 2 or 3 months. Therefore, this index has a predictive value about actual home sales.
Although there are some cancellations, there are not enough for the data to be skewed one way or another. The base value of the index is equal to 100, while the base year is 2001, when there has been a high level of home sales.
The National Association of Realtor’s (NAR) will release the official index value at 14:00 GMT. In case pending home sales increased more than anticipated, this would have a certain bullish effect on the greenback.
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