American FX Outlook: Fed is set to confirm gradual rate hike path while standing pat on rates

What you need to know before markets open

• The Eurozone manufacturing PMI ticked up compared with the flash estimate in April, but still decelerated compared with March.
• The UK construction PMI rebounded modestly in April after falling into the territory indicating economic contraction in March.
• The first quarter Eurozone GDP decelerated from previous growth rate rising 0.4% over the quarter with the unemployment rate remaining steady at 8.5% in March.
• The US private employment report from ADP is expected to see 200K new jobs added in April.
• The US Federal Reserve is expected to hold the rates steady while accentuating the need for the gradual monetary policy normalization in light of recently rising inflation gauges like core PCE and the ISM prices paid.

Wednesday's upcoming market moving events

• The ADP private employment report is expected to see 200K new jobs created in the US economy in April. For details read my Preview here.
• German Bundesbank President Jens Weidmann is scheduled to deliver a speech titled "Central bank communication as a Monetary Policy Instrument" at the Center for European Economic Research, in Mannheim at 15:00 GMT.
• The FOMC is expected to hold rates steady in May readying the markets for June interest rate hike. For details read Yohay’s preview here.

Major market themes

• The US Dollar is taking a breather ahead of the Federal Reserve monetary policy decision trading little changed against EUR and JPY.
• Sterling is recovering from heavy losses of late after the UK construction PMI surprised on the upside in April, reversing the fall into the darkness of economic contraction in March. 
• Watch US Dollar factoring in the FOMC outlook on interest rates in its statement.

Earlier in Asia/Europe

• Caixin manufacturing PMI ticked up to 51.1 in April.
• German manufacturing PMI dipped to 58.1 in April sliding off multi-year peak in every single month of this year so far.
• The Eurozone manufacturing PMI inched a bit higher to 56.2 compared with a flash estimate of 56.0 in April.
• The UK construction PMI rebounded strongly to 52.5 in April after unexpectedly falling to 47.0 in March. 
• The Eurozone GDP rose 0.4% Q/Q in line with expectations while rising 2.5% y/y in Q1 2018.
• The Eurozone unemployment remained steady at 8.5% in March.