EUR/USD is showing limited movement in the Wednesday session. Currently, the pair is trading at 1.1276, up 0.11% on the day. On the release front, there are no German or eurozone events. The ECB is expected to hold interest rate levels and will release a policy statement. The U.S. releases key inflation data. CPI is expected to improve to 0.3% and Core CPI is projected to climb to 0.2%. As well, the FOMC releases the minutes of the March policy meeting. On Thursday, the focus will be on inflation. Germany posts CPI and the U.S. releases PPI. As well, the Federal Reserve will release the minutes of the March policy meeting.
Central banks will be in the spotlight on Wednesday. The ECB is expected to maintain interest rates at a flat 0.00%, where they have been pegged since March of 2016. Investors will be more focused in the rate statement, as a dovish message to the markets could push the euro lower. ECB policymakers have acknowledged the slowdown which has gripped Germany and the eurozone. The manufacturing sector has been particularly hard hit, as a slump in global demand has hurt exports, such as German cars and auto parts. Last week, the ECB minutes from the March meeting were pessimistic, as policymakers acknowledged that the economic outlook remained bleak. If the rate statement is a repeat performance, the euro is likely to point downward.
On the heels of the ECB decision, the Federal Reserve will release the minutes of the March meeting. At the meeting, the Fed announced that it would taper the reduction of its balance sheet to $15 billion in May, and wind up the taper in September. Currently, the Fed is reducing its balance sheet by $30 a month. The taper marks a loosening of policy, and comes in response to weaker economic data out of the U.S. in recent months. The Fed has become more dovish in 2019, saying that no rate hikes are planned prior to 2020. If the minutes are also dovish, investors could respond negatively and the dollar could lose ground.
