EUR/USD remains under pressure and has posted losses for three straight sessions. The pair is steady in the Tuesday session and is trading at 1.2204, down 0.04% on the day. On the release front, German Ifo Business Climate dropped sharply to 102.1, missing the estimate of 102.7 points. In the US, today’s key event is CB Consumer Confidence, which is expected to dip to 126.0 points. As well, the US releases housing and manufacturing reports.
The US dollar started the week with broad gains and has pushed the euro down to 8-week lows. The catalyst for the greenback rally was higher yields for 10-year US treasury bills, which rose to 2.996% on Monday. Higher yields for US-T bills have made them more attractive than European or Japanese counterparts. With oil pushing above $70 a barrel, there are concerns that inflation will rise, which has pushed bond prices lower and yields upwards. The dollar has also benefitted from a reduction in geopolitical risk, with an easing of tensions between North and South Korea, and a lull in the conflict in Syria.
The markets are keeping a close eye on the ECB, which holds a policy meeting on Thursday. 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.
