The euro has edged lower in the Thursday session. Currently, EUR/USD is trading at 1.2376, down 0.28% on the day. On the release front, German Factory Orders declined 3.9%, weaker than the estimate of -1.9%. This marked the steepest decline since January 2017. Later in the day, the ECB releases its rate decision, followed by a press conference with Mario Draghi. In the US, today’s key indicator is unemployment claims.
Investors are keeping a close eye on the ECB, which will set the benchmark rate on Thursday. This will be followed by a press conference with Mario Draghi. Interest rate levels are expected to remain at a flat 0.0%, where they have been pegged for the past two years. What could move the markets, however, is the language used in the press release following the rate decision, as well as Draghi’s press conference. The ECB has continuously included an easing bias, which means that it could increase or extend asset purchases if the economic outlook worsens. If the Bank removes this line, it would represent a less dovish stance, which could push the euro higher. Starting in January, the ECB reduced its monthly asset purchases to EUR 30 billion, and this stimulus program is scheduled to wind up in September. The Bank could extend purchases past this date, although such a move would likely not stir up the markets.
Investors continue to track the latest developments in the tariff crisis, which has shaken up the markets over the past week. President Trump’s threat to impose stiff tariffs on steel imports has infuriated US trading partners, as well as sharp criticism from senior Republican lawmakers. There was further drama on Tuesday, as Gary Cohn, Trump’s chief economic adviser, resigned. Cohnn was a strong advocate of free trade, so his resignation could weaken opposition in the White House to the tariffs. Will Trump make good on his threat or back off? Until the situation is resolved, traders should be prepared for continuing volatility in the markets.
