EUR/USD has posted gains in Wednesday trading, as the pair has climbed to the mid-1.38 range in the European session. Eurozone and German PMIs beat their estimates, although the French releases fell short of expectations. In economic news, Eurozone and German PMIs beat the forecast, but French PMIs did not keep pace, missing expectations. In the US, today's major event is New Home Sales. The markets are expecting a stronger March reading from the key indicator.
US inflation levels have been lukewarm, but so far the Federal Reserve has done little more than point out that it would like to see inflation move closer to the Fed's target of 2%. The House Price Index, a gauge of activity in the housing sector, rose a respectable 0.6% last month, matching the forecast. It's a different tale in the Eurozone, where inflation continues to be persistently low and there is real concern about deflation, which could inflict serious damage on the fragile Eurozone economy. The ECB has balked at taking any action to deal with inflation, but its hand may be forced if inflation levels don't show some life.
The markets haven't reacted to events in Ukraine so far, but that could change if the violence in the east of the country worsens. Russian President Vladimir Putin has threatened to act on his "right" to invade Ukraine, and has also given the country an ultimatum regarding its gas debt. The gas supply from Russia to western Europe is in danger, and if the situation spills out of control, we could see a sharp response from the markets. US Vice-President Joe Biden is in Kiev for a symbolic visit. The West doesn't have many cards to play against Russia, so every move by Putin will be scrutinized and could impact on the markets.
EUR/USD 1.3842 H: 1.3855 L: 1.3801
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