EUR/USD is unchanged in the Wednesday session. Currently, the pair is trading at 1.2393, down 0.07% on the day. On the release front, German GfK Consumer Climate ticked higher to 10.9, above the estimate of 10.7 points. In the US, Final GDP is expected to be revised upwards to 2.7%, after the initial reading of 2.5% back in February. US Pending Homes is forecast to rebound with a strong gain of 2.1%. On Thursday, Germany releases Preliminary CPI, which is expected to remain unchanged at 0.5%. German unemployment change is forecast to post another strong decline of 15 thousand. In the US, unemployment claims is forecast to tick up to 230 thousand, and UoM Consumer Sentiment is predicted to climb to 101.9 points.
In the eurozone, the storyline of stronger economic conditions but low inflation continues in 2018. This trend adds up to the ECB staying the course with regard to its stimulus program, according to a senior ECB policymaker. Governing Council member Erkki Liikanen said on Tuesday that the ECB will have to remain patient with its stimulus program, noting underlying inflation could remain at low levels, even if the economy performs well, since reducing economic slack may no longer trigger higher inflation, as has been the case in the past. 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 tariff dispute between the US and China has shaken up global stock markets and also caused volatility in the currency markets. The dollar recorded losses last week, after President Trump’s dramatic announcement that he was imposing stiff tariffs on up to $60 billion in Chinese imports. China vowed to retaliate and slap imports on a range of US products. This move came on the heels of a blanket US tariff on steel imports. Although Trump backtracked and exempted Canada, Mexico and other countries from the steel tariffs, the threat of a global trading war has unnerved investors. This week, however, China was singing a more conciliatory tune, saying it would apply to the World Trade Organization to overturn the tariffs. The US has imposed the tariffs under a national security provision, but China has argued that the move is a trade barrier with the intent of protecting domestic producers. Although the dispute has not been resolved, the Chinese move has eased tensions and restored investor risk appetite, in the hope that both the US and China will climb down from their trees and reach some agreement instead of imposing tariffs on each other.
