EUR/USD has edged higher on Monday. Currently, the pair is trading at 1.1352, up 0.26% on the day. On the release front, the focus is on inflation data. It’s a slow data calendar to start the week. In the eurozone, the trade balance climbed to EUR 17.2 billion, marking a 9-month high. There are no major U.S. events on the schedule. On Tuesday, Germany releases ZEW Economic Sentiment, which is expected to remain mired in negative territory.
In the eurozone, there were no surprises from February inflation numbers. Eurozone CPI edged up from 1.4% to 1.5%, matching expectations. With inflation below the ECB target of around 2 percent, the bank is unlikely to raise rates until there is a significant improvement in economic data out of Germany and the eurozone. Back in 2018, the ECB had projected raising interest rates later this year, but the worsening economic landscape has forced the bank to push back its forecast for future rate hikes. At its March policy meeting, the ECB said it would not raise rates prior to 2020 and this dovish stance soured investors on the euro and sent the currency lower.
With the U.S-China trade war showing signs of easing, there were expectations that President Trump and Chinese President Xi might hold a summit in late March. However, it was reported last week that the two leaders will not meet before April. President Trump has said that there will be news in the next 3-4 weeks, which has raised hopes that China and the U.S. will hammer out an agreement. If there are positive developments in the trade war, risk appetite will rise and could propel EUR/USD to higher levels.
