EUR/USD has posted slight gains in the Thursday session. Currently, the pair is trading at 1.2175, up 0.12% on the day. On the release front, German GfK Consumer Confidence edged down to 10.8, close to the estimate of 10.9 points. Later in the day, the ECB releases a rate statement, with ECB President Mario Draghi following up with a press conference.
All eyes are on the ECB, which will announce its most recent monetary policy decision on Thursday. Eurozone indicators have softened in recent weeks, raising concerns that ECB President Mario Draghi could sound dovish about the eurozone economy. This could weigh on the euro. At the March meeting, policymakers made a minor move and dropped a pledge to increase stimulus if needed. Will we see additional ‘baby’ steps at the April meeting? The ECB has said it intends to continue bond purchases until at least September and will maintain interest rates at current levels until “well past” the end of the program. Traders shouldn’t expect any dramatic moves at the policy meeting, as the bank will likely continue to preach patience and prudence.
The euro has lost close to 1% this week, as the US dollar has flexed its muscles against its rivals. Much of the credit for the dollar rally goes to rising yields on US bonds, which have hit 4-year highs this week. On Wednesday, 10-year US Treasury notes climbed to 3.015%, and 2-year bonds have increased to 2.504 percent. With inflation appearing to be on the rise, there are stronger expectations that the Federal Reserve will raise rates four times in 2018, which is good news for the US dollar. Another factor helping the US dollar has been a recent reduction in geopolitical risk, with an easing of tensions between North and South Korea, and a lull in the conflict in Syria.
