ince its last meeting in March, economic news out of the Eurozone has been, on the whole, fairly encouraging, suggesting that the period of ultra-loose monetary policy in the Euro-area may soon be coming to an end. Economic activity has picked up pace. The latest composite PMI, which represents growth in both the manufacturing and services sector, has increased to its highest level in six years. Headline inflation also hit the central bank’s 2% target in February, albeit trailing off to 1.5% in March.

The central bank is certain to keep its policy unchanged at this month’s meeting, and investors will instead be awaiting President Mario Draghi’s comments on the overall health of the Eurozone economy. However, with the outcome of the French Presidential Election run-off vote in May not yet set in stone and with core inflation still stuck well below one percent, we think the ECB is unlikely to significantly alter its tone at today’s meeting. Draghi may instead wait until June before providing further clarity on the central bank’s plans when it releases its updated staff projections.

In the currency markets yesterday, the US Dollar was broadly stronger against its major peers throughout much of the session on hopes that Donald Trump’s Treasury Secretary Steven Mnuchin would announce his long awaited tax reform that could boost the greenback. However, investors were left slightly disappointed, with nothing new in yesterday’s announcement. Mnuchin reiterated the Trump Administration’s goal to lower corporate tax to 15% from 35%, although markets were unconvinced the cuts would “pay for themselves in growth, reduction in deduction and closing loopholes” as indicated.

Major currencies in detail

GBP

Sterling was fairly range bound throughout much of trading on Wednesday, with a lack of significant announcements out of the UK leading to a fairly quiet trading session.

This Friday’s GDP figures will be the only real announcement of any note in Britain this week. Growth is expected to have slowed somewhat in the first quarter of the year to around 0.4% quarter-on-quarter from 0.7% in Q4. In the absence of any domestic news today, the Pound is likely to be driven by this afternoon’s ECB meeting.

Investors may also have one eye on next week’s EU summit. The talks are expected to focus on the rights of EU nations living in the UK as well as how much, if anything, the UK will have to pay into the EU budget in order to cover current and future liabilities.

EUR

The single currency slipped up from its recent high against the US Dollar yesterday, ending London trading over half a percent lower as investors awaited today’s ECB meeting. Any hints that easing measures are coming to an end are unlikely, although more upbeat comments from Draghi on the state of the economy could provide a boost for the Euro today.

The monthly business confidence indexes from IFO were broadly positive on Wednesday. The business climate index increased to 112.9 in April from a revised 112.4, although there was little reaction in the Euro off the back of the news.

USD

The Dollar rose by around half a percent against its major peers yesterday, with investors in an optimistic mood that President Trump would announce his long awaited tax cuts. However, the announcement was broadly underwhelming, and the greenback have back some of its gains yesterday evening.

We’ll see mostly second tier economic news out of the US today. Durable goods orders, a key measure watched by the Federal Reserve when deciding on monetary policy, will be released at 13:30 UK time. However, all eyes will be on the ECB meeting.