EUR/USD is slightly lower in the Wednesday session. Currently, the pair is trading at 1.0540. It’s another full day on the release front, with a host of events in the eurozone and the US. Germany will release inflation, employment and manufacturing reports. The eurozone will also publish Manufacturing PMI. In the US, today’s highlight is the ISM Manufacturing PMI. On Thursday, the eurozone releases CPI reports, and the US will publish unemployment claims.
It could be a busy day for euro, as Germany, the largest economy in Europe, releases a host of key indicators. After a decline in January, Preliminary CPI is expected to rebound with a gain of 0.6% in February. The markets are also expecting strong numbers from unemployment claims and Manufacturing PMI. Last week, Ifo Business Climate improved to 111.0, beating the estimate of 109.6. The revised GDP posted a gain of 0.4% in the fourth quarter, unchanged from Preliminary GDP. If Wednesday’s releases meet expectations, the euro could respond with gains.
Currency markets showed muted reaction to President Trump’s speech to Congress on Tuesday. Trump promised “massive” tax relief for the middle class as well as corporate tax cuts. However, he failed to provide details or even timelines on tax reform or infrastructure spending, two themes which he has discussed since the election campaign. Trump stated that he will ask Congress to approve legislation for $1 trillion in infrastructure spending, “financed through both public and private capital”. Analysts noted that although Trump touched on the protectionist theme, such as the trade imbalance with China, his tone was less belligerent than we’ve seen in the past.
With Federal Reserve policymakers continuing to sound hawkish about a rate move, the US dollar could make some headway against the euro and other major currencies. On Tuesday, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed, which raised the odds of a March hike at 66%, according to Reuters. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for “serious consideration” at the March policy meeting. The markets will be listening closely to speeches from other FOMC members this week, culminating in speeches from Janet Yellen and Fed Governor Stanley Fischer on Friday.