EUR/USD is steady in quiet trade on Tuesday, as the euro trades at 1.1330 in the European session. On the release front, the Eurozone trade surplus improved to EUR 22.3 billion, but this fell short of expectations. In the US, the markets are awaiting the Consumer Price Index reports and Building Permits. On Wednesday, the Eurozone publishes Final CPI and the Federal Reserve will release the minutes of its April policy meeting. On Friday, Eurozone and Germany GDP reports were released for the first quarter, and both indicators posted respectable gains. Germany's economy expanded 0.7%, above the forecast of 0.6%. Eurozone Flash GDP gained 0.5%, shy of the estimate of 0.6%. Despite growth in the first quarter, the Eurozone remains stuck with very low inflation levels. German Final CPI declined 0.4% in April, compared to a gain of 0.8% a month earlier. Another sore spot in the Eurozone is the manufacturing sector, which has struggled as the soft global economy has meant less demand for European-made products. Eurozone Industrial Production declined 0.8% in April, compared to a forecast of -0.2%. The indicator is in trouble, as this marked the third decline in four months. German Industrial Production was dismal, posting a decline of 1.3%, which well off the forecast of -0.2%. This marked the fourth decline in the past five releases. The Federal Reserve, never far from the financial headlines, will take over center stage on Wednesday with the release of the April minutes. The Fed has sent out the message that a June hike is on the table, but the markets remain skeptical, especially after the weak Nonfarm Payrolls report earlier this month. With the economy showing mixed employment numbers and inflation stuck at low levels, a June hike would be nothing less than a shock, a reason in itself for the Fed to remain on the sidelines. The markets are clearly expecting rates to remain at the current level of 0.25%, with the implied probability of a hike down to just 4%. The US economy remains generally solid and last week wrapped up on a high note, as retail sales and consumer confidence reports beat expectations. Core Retail Sales posted a strong gain of 0.8%, above the estimate of 0.6%. Retail Sales surged 1.3%, its strongest gain in over six years. The gain was all the more impressive as the markets had anticipated a decline of 0.3%. Consumer confidence also looked sharp, as UoM Consumer Sentiment jumped to 95.8 points, compared to the estimate of 89.9 points. This was the indicator's best showing since April 2015. On the inflation front, PPI posted a small gain of 0.2%, shy of the forecast of 0.3%. Inflation levels remain weak, and Tuesday's CPI readings are expected to show weak gains.
