EUR/USD continues to post slow but steady gains. In the Thursday session, the pair is trading at 1.2341, down 0.22% on the day. On the release front, Eurozone Industrial Production disappointed with a second straight decline. The reading of -0.8% fell short of the estimate of 0.1%. Later in the day, the ECB releases the minutes of its March rate meeting. In the US, the key event of the day is unemployment claims, which is expected to drop to 231 thousand. On Friday, Germany releases Final CPI and the US publishes UoM Consumer Sentiment.
Investors are casting a wary eye on developments in Syria. Last week, Syrian forces allegedly used chemical weapons against rebel positions, and a UN Security Council meeting on Tuesday ended inconclusively after Russia cast a veto on a US proposal to probe the attack. US President Trump has warned that a US response is imminent, and Russia has countered that it will respond to any US move. If Trump makes good on his promise, investor risk appetite could sink and impact on the currency markets.
The Federal Reserve minutes were hawkish in tone, a reflection of a strong US economy. All of the Fed policymakers indicated that the US economy would continue to improve and that inflation would rise in the next few months. At the March meeting, the Fed unanimously voted to raise rates by a quarter-point, bringing the benchmark rate to a range between 1.50% and 1.75%. The Fed projection for rate policy in 2018 remains at three hikes, although there is speculation that the Fed could revise the forecast to four rate hikes. Last week, Fed Chair Jerome Powell said that the Fed would likely continue to raise rates in order to keep a lid on inflation, but added that the rate moves would be gradual. A new headache for the Fed is the escalating trade battle between the US and China, which could hurt the economy and raise consumer prices. Next on the menu? The Fed is expected to sit tight in May and raise rates at the June meeting.
