EUR/USD has posted slight losses in the Wednesday session, continuing the downward trend seen on Tuesday. Currently, the pair is trading at 1.1569, down 0.17% on the day. On the release front, German PPI remained steady at 0.5%, edging above the estimate of 0.4%. The ECB Forum continues on Wednesday, with ECB head Mario Draghi and Fed chair and Jerome Powell joining a panel discussion. The U.S will release Existing Home Sales, which is expected to rise to 5.52 million. On Thursday, the eurozone releases consumer confidence, and the U.S publishes manufacturing and employment reports.
Patience, patience. That was the message from on Tuesday from Mario Draghi with regard to interest rate policy. Last week, the ECB announced that it was winding up its asset-purchase plan by the end of the year, but added that it would not raise interest rates before next summer. This dovish message sent the euro sharply lower. Draghi said that the ECB will be ‘patient in determining the timing of the first rate rise’. Draghi also made reference to inflation, saying that ‘inflation expectations remain well anchored’. However, analysts were quick to note that eurozone inflation has fallen short of the bank’s target of just below 2 percent for five years. Draghi acknowledged that there were external factors which could weigh on inflation, including the threat of global protectionism and higher oil prices. There is also the vexing problem that higher wages have failed to translate into increased inflation. Draghi would like to get through the European Forum without shaking up the euro, and so far he has succeeded.
Are we heading for a global trade war? Investors are nervous, and this sentiment has boosted the U.S dollar this weak. The euro is having a rough week and is currently trading at its lowest level since early November. The most recent round of the trade spat between China and the U.S started on Friday, when the U.S announced a 25 percent tariff on $50 billion in Chinese goods. After China responded with an identical move on U.S. imports, President Trump has now threatened to impose 10 percent tariffs on some $200 billion in Chinese goods. Not surprisingly, China has threatened to retaliate against this latest move. Trump has vowed to take action on the $375 billion trade deficit that the U.S has with China, claiming that the latter is guilty of unfair trade practices. With the first of the U.S tariffs scheduled to take effect on July 6 and no signs that either side will blink first, the euro could face some significant headwinds.
