EUR/USD is steady in the Wednesday session. Currently, the pair is trading at 1.1771, up 0.03% on the day. On the release front, there are no eurozone or German events. In the U.S, the focus is on the Federal Reserve, which virtually certain to raise the benchmark rate to a range between 2.00% and 2.25%. On Thursday, there are key indicators on both sides of the pond. Germany releases Preliminary CPI, while the U.S will publish Final GDP and durable goods orders.

All eyes are on the Federal Reserve, which is widely expected to raise rates by 25 basis points at the conclusion of its policy meeting on Wednesday. What will be the tone of the rate statement? The U.S economy is in excellent shape, with GDP for Q2 expected at 4.2%, and unemployment hovering below 4 percent. However, the escalating global trade war has raised concerns that it could cool down global economic growth and hurt the U.S economy as well. Still, another rate hike in December is pegged at 78%, according to the CME, and some experts are predicting up to four rate hikes in 2019.

The euro briefly pushed past the 1.18 line on Monday. This followed hawkish remarks from ECB President Mario Draghi, who was testifying before the European Parliament Economic and Monetary Affairs Committee. Draghi said there had been a “relatively vigorous pick-up in underlying inflation”. With regard to the ECB’s forward guidance, Draghi said that the ‘”through the summer of 2019″ was a timeline in which conditions warrant a first rate increase. This means that the September meeting will be a live meeting, with many analysts predicting a rate hike in December.

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Trade tensions have escalated this week, with the U.S and China slapping tariffs on each other. On Monday, the U.S imposed tariffs on some $200 billion worth of Chinese goods, while China responded with tariffs of $60 billion on U.S products. There may be more headwinds ahead, as China sharply attacked the U.S, saying it had plunged “a knife to China’s neck” with the new tariffs. The Chinese have canceled trade talks with the Trump administration, and no new talks are likely to be held until the mood improves between the world’s two largest economies. Previous rounds of tariffs between the two economic giants have boosted the U.S dollar, but so far, investors have reacted calmly and have not dumped their euro assets in favor of the greenback.

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