EUR/USD has posted slight losses in the Tuesday session. Currently, the pair is trading at 1.2412, down 0.30% on the day. On the release front, German Import Prices declined 0.6%, weaker than the estimate of -0.3%. This marked the first decline since July. In the US, CB Consumer Confidence is expected to rise to 131.2 points. On Wednesday, Germany GfK Consumer Climate and the US publishes Final GDP.
The ECB will stay the course with regard to its stimulus program, according to a senior ECB policymaker. Governing Council member Erkki Liikanen said on Tuesday that if eurozone growth remains robust, inflation could remain lower than expected. With the current bond purchase program set to expire in September, there is speculation that the ECB will wind up the program, after years of pursuing an accommodative policy. If inflation does move closer to the ECB’s target of around 2 percent, there is a greater likelihood that the bank will not extend stimulus, and could entertain raising interest rates in 2018.
The business sector continues to have strong confidence in the German economy, but there is concern about possible headwinds due to recent tariffs imposed by the Trump administration. The German Ifo Business Climate report dipped to 114.7 in March, which matched the forecast. However, this marked a second straight drop, and was the lowest reading in 11 months. The report attributed lower business morale to concerns that tariffs could hurt transatlantic trade, as well as the negative impact of a stronger euro. On the bright side, tax reform in the US and the economic rebound in the eurozone have increased the demand for German goods and services.
