The Dollar Retreats as European Sentiment Increases

European stocks are mixed on Thursday as the dollar gives back some of its recent gains. Oil prices continued to move higher, following Wednesday’s report from the Department of Energy which showed a larger than expected draw. The German institute predicts increasing growth for 2017 and 2018, while German inflation was mixed. European Confidence is climbing which will continue to put pressure on the ECB to end their quantitative easing program.

German institutes lift growth forecast for 2017 to 1.9%, followed by 2.0% in 2018. The institutes say in their latest joint economic projection that the recovery has broadened and strengthened and that indeed ties in with the latest data out of Germany, even if the Ifo readings came in somewhat weaker than anticipated. Further backing then for Weidmann’s hawkish stance on further bond buying, although it seems, for now, he won’t get a majority to push through his call for an end to QE just yet.

German State Inflation Data is Mixed

German state inflation data mixed, with annual rates falling in Brandenburg, picking up in Saxony and Hesse and holding steady in Bavaria and NRW. Spanish HICP rate fell back slightly to 1.9% year over year from 2.0% year over year and while both Germany and Spain remain at the upper end of the relatively wide inflation spectrum, the overall Eurozone number is also expected to hold pretty steady compared to August.

Eurozone ESI economic confidence higher than expected at 113.0, up from 111.9 in the previous month. Industrial confidence rose to 6.6 from 5.0, while the services sector reading improved to 15.3 from 15.1 and consumer confidence was confirmed at -1.2, also up from the previous month. Together with the strong PMI readings, the data adds to signs that the recovery continued to strengthen in Q3, which backs the ECB’s move towards a slightly less accommodative policy stance and a reduction in monthly QE purchases next year, although there doesn’t seem to be a firm majority yet for a commitment to an end date for QE.