After a quiet day on Tuesday, the euro has resumed its losing ways in the Wednesday session. Currently, the pair is trading at 1.1405, down 0.53% on the day. On the release front, German and Eurozone Manufacturing PMIs slowed in October and missed expectations. German Manufacturing PMI dropped to 52.3, short of the estimate of 53.4 points. The eurozone release fell to 52.1, down to 53.0 points. German and Eurozone Services PMIs followed a similar trend. Still, the manufacturing and services releases all indicated expansion. The ECB is holding its policy meeting and will set the main financing rate.
All eyes are on the ECB, with policymakers widely expected to hold the course with interest rate levels, which have been pegged at a flat 0.00% for almost three years. However, there are no shortage of geopolitical hot spots, including the spike in Italian bond yields, the Brexit impasse and continuing volatility in global equity markets. Despite these issues, the ECB is expected to end its massive stimulus program in December. The markets are now looking ahead to 2019, focusing on the timing of a rate hike. The ECB has adhered to the line that rates will stay on hold “through the summer of 2019”. However, it’s unlikely that policymakers can ignore the issue of a rate hike, which would be a historic move, as the bank last raised rates in 2011. The head of the Dutch central bank, Klaas Knot, recently said that the ECB will have to initiate discussions over the timing of a rate hike in January. Investors will be listening closely to ECB members, as any hints of an interest rate move could send the euro upwards.