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EUR/USD: euro treads water with German data, ECB meeting in focus

EUR/USD traded in a narrow band near the $1.085 level in Asia on Thursday. The price action put the euro on track to close around 1% lower for the month of April, after starting the month trading above $1.10.

EUR/USD outlook: lacks direction in Asian trade

EUR/USD drifted sideways during the Asian session on Thursday, ahead of the European Central Bank’s (ECB's) all important policy meeting.

As UK traders got to the desk on Thursday morning, the euro was holding above the $1.085 level after pushing higher following the US Federal Reserve's (Fed’s) policy meeting.

Support for the greenback eased off across the board amid another bout of risk-on sentiment, as US stocks closed higher on optimism about a possible treatment breakthrough for Covid-19.

However, EUR/USD eased back from its intraday highs above $US1.087 in Asian trade, as markets await the outcome of the ECB meeting where the central bank is likely to stay under pressure to maintain a dovish outlook.

With EUR/USD unable to find a sense of direction, the euro is on track for a monthly fall in April of around 1%, after starting the month above $1.10.

Volatility in April was more subdued, as markets assessed the impact of unprecedented government stimulus measures after currency volatility spiked to multi-year highs in March.

ECB is likely to follow the Fed down a dovish path

Central banks will continue to drive the narrative for EUR/USD this week, after US Fed chair Jerome Powell warned of a lasting economic impact from Covid-19 on Wednesday.

Powell stopped short of announcing any specific new policy measures, but said the Fed stood ready to take additional action if need be.

That cautious tone is likely to be followed by the ECB, which is expected to keep its emergency policy settings unchanged.

Traders will also be watching key data due out of the eurozone on Thursday, starting with German retail sales which are expected to slump by more than seven per cent in March.

Eurozone unemployment figures are also due, with the jobless rate forecast to rise to 5.2% in April, up from the 5% in March. And first-quarter (Q1) eurozone gross domestic product (GDP) is forecast to show a fall quarterly contraction of almost 4% - the sharpest fall since the 2008 financial crisis.

However, markets largely shook off an equally weak GDP print for the US economy on Wednesday, which showed economic growth slumped by 4.8% - above expectations of around four per cent.

Regardless, traders will expect a more dovish lean from the ECB as part of efforts to boost broader sentiment amid the challenges currently faced by major eurozone economies.

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