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EUR/USD stuck in neutral ahead of EU summit

EUR/USD held steady in Asian trade, after a brief rally in global markets after Germany’s ZEW survey of business expectations bounced back in April.

EUR/USD doesn’t see much action in Asia on Wednesday

EUR/USD held steady in a relatively calm session across Asian markets on Wednesday, after a mild positive reversal in global markets overnight.

Since the end of last week, the $1.085 level has marked the anchor point for EUR/USD, with efforts to post a meaningful break either side of that benchmark repeatedly coming up short.

And that remained the case in Asia, after the euro found some momentum in during global trade on Tuesday where it briefly reversed a recent downside trend.

EUR/USD bounced off of $1.082 to test $1.088, before again losing momentum shy of the $1.09 mark – a level it hasn’t breached in almost a week.

That followed a positive print for the monthly ZEW survey of business expectations in Germany – an important barometer for the eurozone’s largest economy.

The reading beat forecasts with a positive print of 28.2 in April, after plunging to -49.5 in March.

The Asian session failed to provide any catalysts for the world’s most frequently traded currency pair, as EUR/USD oscillated around its familiar $1.085 with no breaks in either direction.

Potential roadblocks ahead as focus turns to the ECB

While EUR/USD was representative of a broader lack of volatility across asset classes on Wednesday, traders and analysts continue to keep a close eye on geopolitical developments in the eurozone.

The EUR/USD may continue to trade within a narrow band until markets get a sense of direction from EU council members, following a key policy meeting on Thursday.

The meeting will take place amid continued concerns about the economic health of more heavily indebted member states, who are now also facing severe disruption from the COVID-19 pandemic.

All eyes are on Italy, which has been hit hard by the virus and is also dealing with a weak economy, high debt and a growing fiscal deficit.

Yields on Italian ten-year bonds climbed above 2% this week, for the first time since market chaos peaked in late March.

Policymakers across the eurozone are still discussing the idea of 'eurobonds', which would serve to share the debt burden across member states. However, the idea continues to draw a lukewarm response from wealthier states such as Germany and Netherlands.

If no deal is reached on Thursday and spreads on Italian bond yields continue to widen, the European Central Bank (ECB) may then come under pressure to expand its existing asset purchase program, as part of efforts to maintain stability in the single currency union.

Taking stock of the current market backdrop, Thursday’s meeting continues to loom as the key event for EUR/USD traders heading into the weekend.

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