EUR/USD is steady on Wednesday, as the pair trades in the mid-1.24 range in the European session. On the release front, Eurozone CPI edged lower to 0.3%, matching the forecast. In the US, the FOMC will release its policy statement, and we’ll get a look at November CPI. The markets are expecting a small decline of 0.1%.
The Federal Reserve will be in the spotlight on Wednesday, as the FOMC issues its monthly policy statement. With the US economy continuing to grow, the markets are confident that the Fed will take action and raise interest rates in the first half of 2015. One key question is whether the Fed will adjust its forward guidance; that is, will the Fed make use of policy statements to provide the markets with more information about its projections regarding interest rate policy. If this does occur, there will be less uncertainty about the Fed’s monetary policy and this could boost the US dollar against its major rivals.
Eurozone inflation remains at low levels, and there were no surprises as Eurozone CPI dipped to 0.4% in November, down from 0.4% a month earlier. Persistent efforts from the ECB have not improved matters, and the danger of deflation has risen with the crash in oil prices. Germany, the locomotive of the Eurozone, has not been immune to weak inflation, with German Final CPI coming in at a flat 0.0% in November.
The week started off on a positive note in the Eurozone, as German Manufacturing PMI improved to 51.2 points, up from 50.0 points a month earlier. A reading above the 50-point level indicates expansion. The Eurozone released improved to 50.8 points, up from 50.4 points. French Manufacturing PMI showed little change, coming in at 47.9 points. The index has been under 50 since April, indicative of ongoing contraction. Services PMIs were mixed, as the German release weakened, while the Eurozone and French readings improved.
EUR/USD 1.2450 H: 1.2515 L: 1.2449
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