EUR/USD has is steady in the Thursday session. Currently, the pair is trading at 1.1380, up 0.10% on the day. The ECB holds its policy meeting and is expected to wind up its stimulus program. German Final CPI dropped to 0.1%, matching the estimate. In the U.S., the key event is unemployment claims, which is expected to drop to 226 thousand. On Friday, Germany and the eurozone release manufacturing PMIs, and the U.S. will publish retail sales reports.
After three years of stimulus, the ECB is expected to finally wind up the bank’s bond purchase program at the Thursday policy meeting. Through the program, the ECB purchased some 2.5 trillion euros in assets. The program was implemented in order to kick-start the economy and raise ultra-low inflation levels. Inflation has moved closer to the ECB target of around 2 percent, and the eurozone economy performed well earlier in the year. This prompted the ECB to announce that it would wind up the program in December. However, economic conditions have deteriorated in recent months, as the nagging U.S.-China trade war has weighed on the global economy and hurt the export and manufacturing sectors in Germany and the eurozone. Although the timing may not be ideal, the ECB is likely to stick with its pledge to wind up stimulus, since a change in stance would severely hurt its credibility. At the same time, the ECB is expected to fully reinvest the proceeds and maintain its bond holdings as long as is needed, in order to boost inflation. The ECB target of around 2 percent has remained elusive, and weak economic activity in the eurozone in the second half of the year is weighing on inflation levels.
