EUR/USD is slightly lower in the Thursday session. Currently, the pair is trading at 1.1712, down 0.13% on the day. On the release front, German GfK Consumer Climate edged lower to 10.6, just shy of estimate of 10.7 points. Later in the day, the ECB sets its minimum bid rate. The U.S will release durable goods reports and unemployment claims.
After weeks of a bruising trade war, the EU and U.S have agreed to take steps to reduce tensions. On Wednesday, EU Commission President Jean-Claude Juckner met with President Trump, and the talks appear to have been more successful than expected. The parties agreed to hold off on any further tariffs while talks are ongoing. This is a major concession from Trump, who had threatened to impose tariffs on European car imports. U.S tariffs on European aluminum and steel will remain in place, but Juckner pointed out that the U.S has agreed to reassess these measures. The surprise agreement eases fears of a full-blown transatlantic trade war. Will the goodwill displayed by Trump extend into some kind of agreement with China as well?
All eyes are on the ECB, which will set interest rates later on Thursday. The markets are not expecting anything dramatic from policymakers, with rates expected to remain at 0.00%. In June, the ECB decided to end its massive bond-purchase scheme by the end of the year, which has amounted to some 2.6 trillion euros. However, the ECB is playing it very cautious regarding any interest rate hikes, with the ECB saying it would maintain record-low rates “through the summer” of 2019. Trade tensions between the EU and U.S have dampened growth forecasts for the eurozone, although the Juckner-Trump meeting has considerably improved market sentiment. The ECB could tweak its guidance, but is unlikely to make any changes to current monetary policy.
