Euro Remains Subdued EUR/USD has edged higher in the Tuesday session, as the pair slightly below the 1.12 line. On the release front, there are only three events on the schedule, so it could be another uneventful day for the euro. German PPI declined 0.1%, short of the forecast of +0.1%. The US will release Building Permits and Housing Starts, with the markets expecting little change in the August reports. On Wednesday, the Federal Reserve will release its monetary policy statement.
The euro has moved higher this week, reversing directions after sharp losses on Friday. The catalyst for the 100-point drop was US consumer inflation numbers, which were better than expected. CPI posted a gain of 0.2%, edging above the forecast of 0.1%. It was a similar story with Core CPI, which rose 0.3%, compared to the forecast of 0.2%. CPI was up from 0.0% in July, with the rise being attributed to higher shelter and health care costs. If inflation indicators continue to rise, there is a greater chance of a rate hike in December, and increased speculation about a Fed hike could push the greenback to higher levels. The Federal Reserve will hold a policy meeting on September 21, and a rate hike is considered extremely unlikely, with a hike pegged at just 12 percent.
Janet Yellen delivered an upbeat speech back in August, and the predictable result was increased speculation about a rate hike as early as September. However, recent economic numbers have been mixed, so the Fed is widely expected to remain on the sidelines this week and revisit monetary policy in December. Still, the Fed policy statement will be closely monitored by the markets, which will be looking for hints regarding a December move. If Janet Yellen delivers a dovish message,
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