EUR/USD has lost ground in the Friday session. Currently, the pair is trading at 1.2299, down 0.40% on the day. On the release front, there are no major events. German PPI improved to 0.1%, but this fell short of the estimate of 0.2%. Later in the day, the eurozone releases consumer confidence, which is expected to remain at zero for a third straight month.
The German and eurozone economies have been performing well in 2018, but inflation levels remained low in March. German PPI improved from -0.1% to 0.1%, but missed the estimate of 0.2%. Final CPI came in at 1.3%, up from 1.1% a month earlier. Still, the reading fell short of the estimate of 1.4%. With inflation well below the ECB inflation target of around 2%, there is little pressure on the ECB to tighten its accommodative monetary policy. The ECB’s stimulus program is scheduled to wind up in September, but an increase in interest rates is unlikely before 2019.
Investors are keeping a close eye on the ECB, which meets next week for a policy meeting. Despite stronger economic conditions in the eurozone, the ECB has been in cautious mode. At the March meeting, policymakers took a small step, dropping a pledge to increase stimulus if needed. Will we see additional ‘baby’ steps at the April meeting? The markets are not expecting any change in forward guidance, and concerns over recent trade disputes could mean a dovish statement from ECB President Mario Draghi. Traders shouldn’t expect any dramatic moves next week, as the bank will likely continue to preach patience and prudence.
