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Weekly EUR/USD Outlook: 2017, January 08 - January 15

EUR/USD slipped to new 14-year lows in the wake of 2017 but recovered very quickly thanks to weakness in the USD. The second week of January features trade balance and industrial output measures.

Data in the euro-zone has been relatively positive, with a significant drop in German unemployment and a rise in inflation, especially in Germany. Retail sales missed expectations, but this did not stop the euro. In the US, data had a good start with an excellent report from the manufacturing sector but then became sour with ADP. The meeting minutes from the Fed hurt most, as they showed that Yellen and co. got a bit ahead of themselves with expectations for stimulus from Trump. The last word went to the dollar, with the NFP report: wages are up 2.9%, triggering talk about inflationary pressures.

1. German Industrial Production: Monday, 7:00. Germany is considered the locomotive of the continent. In October, output rose by 0.3%, bouncing after a slide seen beforehand. A rise of 0.7% is on the cards.
2. German Trade Balance: Monday, 7:00. German enjoys wide trade surpluses. Back in October, this stood at 20.5 billion euros. Germany’s exports keep the euro bid. A similar level of 20.8 billion is estimated for November.
3. Sentix Investor Confidence: Monday, 9:30. This 2800-strong survey disappointed in December with a slide back to 10 points, ending four consecutive advances and surprises. A bounce to 12.6 is projected.
4. Unemployment Rate: Monday, 10:00. The euro-zone unemployment rate resumed its falls back in October with a drop to 9.8%. This was quite encouraging after the rate got stuck in double-digit measures for a long time. A repeat of 9.8% is forecast.
5. French Industrial Production: Tuesday, 7:45. The second-largest economy in the eurozone saw a squeeze in its output back in October, a drop of 0.2%. Changes here are less volatile than in Germany. An increase of 0.5% is predicted.
6. French Final CPI: Thursday, 7:45. Contrary to Spain and Germany, France’s inflation figure for December missed expectations with 0.3%. This number will likely be confirmed in this final read.
7. Industrial Production: Thursday, 10:00. Despite being released after the German and French figures, the read for the whole continent is of note. A drop of 0.1% was reported in October. A gain of 0.5% is on the cards.
8. ECB Meeting Minutes: Thursday, 12:30. The European Central Bank announced an extension of its QE program through 2017, a removal of some limits on bond buying but also a reduction in the pace of these buys. The bottom line was dovish as seen in the value of EUR/USD The meeting minutes could reveal if the ECB is still very worried about inflation, the reason for extending the program, or actually satisfied with the progress that has been made, the reason for the reduction. It could also tell us something about the next potential moves.

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