EUR/USD has stemmed this week’s losses in the Wednesday session. Currently, the pair is trading at 1.1999, up 0.05% on the day. On the release front, German and eurozone manufacturing reports were within expectations and continued to point to expansion. Preliminary Flash GDP came in at 0.4%, but matched the estimate. In the US, ADP Nonfarm Payrolls are expected to slide to 200 thousand. As well, the Federal Reserve will set the benchmark interest rate.
On the manufacturing front, German and eurozone PMI reports softened in March, but still met expectations. However, there is concern as both indicators dropped for a fourth straight month. The markets are hoping that after a sluggish first quarter, eurozone data in Q2 will improve in the second quarter.
All eyes are on the Federal Reserve, which will release a rate statement on Wednesday. Policymakers are expected to maintain the benchmark rate at a range between 1.50% and 1.75%, and analysts will be keeping a close eye on the rate statement for clues about future rate hikes. Although the Fed is currently projecting three rate hikes in 2018, there is growing sentiment that the Fed will bump this up to four increases. The Fed last raised rates in March, and some analysts see the Fed raising rates once each quarter – in June, September and December. Higher inflation has raised speculation that the Fed will consider raising its rate hike forecast. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures price index, hit the Fed’s target of 2% inflation for the first time in a year in March.
