EUR/USD is showing little movement on Wednesday, after posting gains in the previous two days. Currently, the pair is trading at 1.1339, down 0.02% on the day. It’s a light day for fundamentals, with no major events. In Germany, PPI rebounded with a gain of 0.4%, beating the estimate of -0.2%. Later in the day, eurozone consumer confidence is expected to post a second straight loss of -8 points. There are no data releases out of the U.S., but investors will be keeping a close eye on the Federal Reserve minutes from the January meeting. Thursday will be much busier. Germany and the eurozone will publish PMIs and the U.S. releases durable goods and unemployment claims.
If recent comments out of the Fed are any indication, the minutes from the January policy meeting are likely to be dovish. The Fed has sent signals that it will ease up on rate policy this year, after aggressively raising rates four times in 2018. The January rate statement had a decidedly dovish tone, as policymakers discarded previous pledges of “further gradual increases” in interest rates, and said it would be “patient” before any further hikes. The current Fed projection calls for two rate hikes this year, but that is subject to change, based on the strength of the U.S. economy. The markets have priced in a hold on rates for the near-term, with little expectation of a rate hike in the first half of the year.
With the eurozone and Germany experiencing an economic slowdown, it’s no surprise that investors and analysts are pessimistic about the economic outlook. The ZEW economic sentiment surveys remained mired in deep freeze in February, with scores deep in negative territory. Still, there was a silver lining in the German release, as the readings have improved steadily over the past four months – back in October, the score was -24.7 points. In the first quarter of 2018, the readings were in positive territory, as the German economy was performing well. However, optimism then dissipated, as the global trade war intensified and the German economy slowed. It has been a similar story with the eurozone, as ZEW economic sentiment scores have been in negative territory since the second half of 2018.
