Euro Steady Ahead Of Inflation Data

The euro was steady at $1.38 on Wednesday morning as traders awaited inflation data, seen as a key driver of upcoming European Central Bank policy decisions.

The common currency was weighed down by lackluster German inflation data, but held on to some gains as the situation in Ukraine showed no sign of letting up.

Reuters reported that a key measure of German inflation was worse than expected at 1.1 percent. The data caused many to retract their optimism about the bloc’s inflation dfigues, due out later on Wednesday.

If the region’s inflation figure hasn’t improved from the 0.5 percent which was reported in March, the likely hood of a policy change at the ECB’s meeting next week will increase.

Despite calls from the International Monetary Fund and global peers, the bank has refrained from taking measures to stimulate the bloc’s economy and is widely expected to hold off again at its May 8 meeting.

The common currency has been supported by the ongoing crisis in Ukraine as the euro is seen as easier to obtain than dollars and less likely to be sanctioned if things worsen. 

On Tuesday, the US increased its sanctions against Russian businesses and government officials in an effort to convince Moscow to backtrack on its actions in Ukraine. However, pro-Russian separatists pushed on and seized another major Ukrainian city on Tuesday.

Moving forward markets will be watching the Federal Reserve as the US central bank begins its two day policy meeting.

The bank is expected to continue with its current tapering plan, but investors will be most interested in bank chief Janet Yellen’s forward guidance, specifically when she plans to raise interest rates.