EUR/USD is showing little movement in the Wednesday session. Currently, the pair is trading at 1.1404, up 0.10% on the day. On the release front, there are no major German or eurozone events. The U.S. posts minor manufacturing and housing reports, but the focus will be on Fed Chair Powell’s testimony before a congressional committee. On Thursday, Germany releases Preliminary CPI, and the U.S. will post Advance GDP and unemployment claims.
With a lack of major events on either side of the pond, the markets will have time to focus on Federal Reserve Chair Powell’s testimony before the House Financial Services Committee. There were no surprises from Powell’s testimony before a senate committee on Tuesday, as Powell preached patience with regard to changes in interest rates. Powell stated that the Fed was in “no rush to make a judgment” and made reference to “conflicting signals in the economy”. The labor picture remains bright, with strong hiring and low unemployment. At the same time, consumer spending and housing data have been soft. The markets are expecting the Fed to remain on the sidelines in May and June, meaning that the first hike of 2019 will not come before the second half of the year.
With President Trump waiving his threat to impose new tariffs on China next week, risk appetite remains strong. There is even talk of a meeting between Trump and Chinese President Xi at the end of March if the sides reach an agreement. However, significant questions remain. With almost no news about the substance of the talks, it remains unclear if China will agree to substantial structural changes in trade, as demanded by the United States. Another question mark is whether the current set of tariffs will be completely removed if a deal is reached. If not, market enthusiasm could slip, as the tariffs have caused enormous turmoil in international trade and dampened global growth. Still, if the sides reach a deal, it would be positive news for the struggling eurozone economy and could trigger gains for the euro.
