EUR/USD: Steady After German ZEW Economic Sentiment Slips

 | Jun 17, 2014 06:17AM ET

The EUR/USD is stable on Tuesday, following gains a day earlier. In the European session, the pair is trading in the high-1.35 range. On the release front, German ZEW Economic Sentiment continued to drop and fell short of the estimate. Eurozone ZEW Economic Sentiment improved in May but also fell short of the forecast. Over in the US, we'll get a look at two key releases - Building Permits and Core CPI.

German ZEW Economic Sentiment, a well-respected indicator, continues to lose ground throughout 2014. The index weakened to 29.8 points, well off the estimate of 35.2 points. This was the worst reading we've seen since November 2012. Eurozone ZEW Economic Sentiment improved in May, climbing to 58.4 points. However, this fell short of the estimate of 59.6. Despite the dismal German release, the euro is holding its own against the US dollar.

The ECB lowered interest rates last week in an attempt to shore up flagging inflation levels, but it's still too early to tell if this has achieved the desired effect. On Monday, Eurozone CPI, the primary gauge of consumer inflation, dipped to 0.5%, while Core CPI improved to 0.7%. Both figures matched their estimates, so the euro didn't react to these important releases. We'll get a look at German inflation numbers late in the week. If inflation indicators in the Eurozone don't show substantial improvement, the ECB will be under strong pressure to take stronger monetary measures at its July policy meeting.

After a poor performance last week, US releases started the week on a positive note, as Empire State Manufacturing Index climbed to 19.3 points, its best showing since February 2012. This easily surpassed the estimate of 15.2 points. The markets are keeping a close eye on Core CPI, the primary gauge of consumer inflation. The markets are expecting another weak reading, with an estimate of 0.2%.