The euro has ticked lower in the Tuesday session. Currently, EUR/USD is trading at 1.2248, down 0.11% on the day. In economic news, German ZEW Economic Sentiment improved to 20.4, beating the estimate of 17.8 points. Eurozone ZEW Economic Sentiment followed the same trend, climbing to 31.8, above the forecast of 29.7 points. In the US, the sole event is the Richmond Manufacturing Index, which is expected to edge lower to 19 points. On Wednesday, Germany and the eurozone release services and manufacturing PMIs.
The US government shutdown is over, after just three days. On Monday, the Senate voted 266-150 to extend funding until February 8. This stopgap measure will enable the government to provide services during that time, but the parties will have to hammer out a longer-term agreement. The Democrats held up a funding bill last week, in order to force the Republicans to the table over illegal immigration. The Republicans have promised to hold a vote on this issue, but many Democratic lawmakers remain skeptical that President Trump and the Republicans will deal in good faith over immigration.
The ECB holds a policy meeting on Thursday, and traders should not expect any dramatics at the first policy meeting of 2018. The Bank is expected to retain its pledge to continues buying bonds under its asset-purchase program (QE). The ECB has trimmed QE from EUR 60 billion to 3o billion/mth, but is likely to hold interest rates for 3-6 months after that. Still, ECB policymakers have hinted that the Bank could wind up QE in September, and this pushed the euro higher in recent weeks. If ECB President Mario Draghi hints at an end to QE, the euro will likely gain ground. Draghi may prefer to keep a low profile until March, after policymakers have had a chance to review updated economic forecasts.
