EUR/USD has rebounded with gains in the Wednesday session, after posting losses on Tuesday. Currently, the pair is trading at 1.2277, up 0.30% on the day. On the release front, there are no major eurozone or German indicators. In the US, the current account deficit is expected to widen to $125 billion. On the housing front, Existing Home Sales is forecast to rise to 5.41 million. All eyes are on the Federal Reserve, which is expected to raise the benchmark rate to a range of between 1.50% and 1.75%. On Thursday, Germany and the euorozone release manufacturing PMI, and Germany will also publish the Ifo Business Climate. In the US, the key indicator is unemployment claims.
The markets are keeping a close eye on the Federal Reserve, which will release a rate statement later in the day. The Fed is expected to raise rates for the first time in 2018, and Fed Chair Jerome Powell will preside as chair of the FOMC for the first time, followed by Powell’s first post-FMOC press conference. The Fed has sounded marginally more hawkish recently – will this trend continue in the rate statement? The Fed rate projection remains at three rates for 2018, but with the US economy continuing to perform well, this forecast could be revised upwards to four rates. If the rate statement is unexpectedly hawkish, the US dollar could respond with gains.
After months of rough rhetoric between Britain and the EU, the two sides announced that there would be a transition period following the UK’s departure from the EU in March 2019. The transition deal will kick in at that time, lasting until December 2020. The deal covers the rights and status of EU citizens in the UK and British citizens in the EU, and allows the UK to pursue new trade agreements during that time. There are still some issues to iron out, such as the Northern Ireland border. The transition period is a major, positive development, in that it will enable Britain to enjoy the benefits of the common market, albeit without a seat at the table.
