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EUR/USD – Euro Ticks Higher, U.S Consumer Inflation Reports Next

EUR/USD has recorded slight gains in the Tuesday session. Currently, the pair is trading at 1.1330, up 0.10% on the day. On the release front, Eurozone industrial production rebounded in October with a gain of 0.2%, after a decline of 0.3% a month earlier. This matched the forecast. In the U,S, the focus is on inflation indicators. CPI and Core CPI are expected to drop, with estimates of 0.0% and 0.2%, respectively. On Thursday, Germany releases Final CPI and the ECB will set its interest rate. The U.S will publish unemployment claims.

After three years of stimulus, the ECB is expected to finally wind up the bank’s bond purchase program at the Thursday policy meeting. Through the program, the ECB purchased some 2.5 trillion euros in assets. The program was implemented in order to kick-start the economy and raise ultra-low inflation levels. Inflation has moved closer to the ECB target of around 2 percent, and the eurozone economy performed well earlier in the year. This prompted the ECB to announce that it would wind up the program in December. However, economic conditions have deteriorated in recent months, as the nagging U.S.-China trade war has weighed on the global economy and hurt the export and manufacturing sectors in Germany and the eurozone. ECB policymakers are not expected to change course, but any hints of re-introducing stimulus in 2019 would likely send the euro sharply lower.

When it comes to monetary policy, things can change very quickly. Only a few months ago, the booming U.S. economy led to speculation that the Federal Reserve would continue raising rates in 2019, possibly up to four times. Since then, signs of a slowdown in the economy have caused the Fed to reassess its “gradual rate hike” policy, and many analysts are predicting just one rate hike next year. Three rate hikes so far this year have slowed economic growth, as seen by lower GDP readings and a dismal nonfarm payrolls report for November. Still, the Fed is widely expected to raise rates at the policy meeting on December 19, with the CME setting the odds of a hike at 80 percent.