EUR/USD is lower in the Monday session. Currently, the pair is trading at 1.1409, down 0.26% on the day. With little on the data calendar, markets expect a quiet start to the week. German PPI dropped to 0.2%, short of the estimate of 0.4%. The sole U.S. event is a speech from FOMC member Rafael Bostic.
The euro ended the week with modest gains, as eurozone CPI reports showed slight improvement in July. Final CPI came in at 2.1%, edging above the 2.0% gain in June. Final Core CPI followed the same trend, with a gain of 1.1%, compared to 0.9% in June. Both indicators matched the estimates. At the same time, inflation remains well below the ECB target of just below 2.0%, so an interest rate hike is unlikely before the second quarter of 2019. The focus remains on the European Central Bank’s asset-purchase program, which is expected to wind up in December.
After months of an escalating trade war the U.S and China, the markets are hoping that talks between the sides will reduce tensions. The two economic giants will hold low-level trade talks this week in Washington, and although a dramatic breakthrough is unlikely, the fact that the two sides are talking has investors cheering. The U.S. is unhappy with the Chinese protection of local markets and technology transfers required in order for U.S businesses to operate in China, but it’s questionable if the Chinese will show much flexibility. Both sides have slapped tariffs of $34 billion on each other’s products, with another $16 billion in tariffs scheduled for August 23. If the negotiations lead to the suspension of the upcoming tariffs, risk appetite would rise and the euro could gain ground. It’s been a dreadful August for the euro so far, as the currency has fallen 2.4%.