EUR/USD continues to lose ground this week. In the Tuesday session, the pair is trading at 1.2037, down 0.36% on the day. On the release front, European markets are closed for May Day, so there are no eurozone or German releases. In the US, today’s key event is ISM Manufacturing PMI, which is expected to drop to 58.4 points. On Tuesday, the eurozone releases Preliminary Flash GDP, and Germany and the eurozone will publish PMI reports. The US will release ADP Nonfarm Employment Change and the Federal Reserve will release a rate statement.
German Retail Sales, the primary gauge of consumer spending, continues to struggle. The indicator dropped 0.6% in April, marking a fourth consecutive decline. At the same time, the German consumer continues to show optimism regarding the economy, as underscored by recent GfK consumer confidence reports. The indicator edged lower to 10.8, just shy of the estimate of 10.9 points. The indicator has hovered close to the 11-point level since July 2017.
The Federal Reserve winds up its monthly policy meeting on Wednesday. The markets are expecting the Fed to maintain the benchmark rate at a range between 1.50% and 1.75%, and analysts will be keeping a close eye on the rate statement – a hawkish statement could propel the US dollar to higher levels. There is growing sentiment that the Federal Reserve will raise interest rates four times this year, although Fed policymakers have not changed their forecast of three increases in 2018. One scenario envisions the Fed raising rates once each quarter until the economy shows signs of slowing down. If inflation continues to move higher and economic conditions remain strong, the dollar should continue to perform well against the euro and other major currencies.
