Euro is trading sideways against the dollar today, with slight gains of 0.03%, near the level of 1.08690.

This euro consolidation comes despite the return of a faster-than-expected contraction in producer prices in Germany in February, in addition to the state of caution in the markets ahead of the release of the outcomes of the Federal Open Market Committee (FOMC) meeting today.

The Producer Price Index (PPI) recorded a contraction of 0.4% on a monthly basis in February in Germany, faster than expectations of 0.1%. On an annual basis, price deflation also slowed less than expected, from 4.4% to 4.1%, versus expectations of 3.8%.

The biggest driver of this decline was the lower prices of energy, metals and basic chemicals compared to what they were a year ago.

Today’s producer price figures, which are a leading indicator of the path of consumer price inflation, do not appear to be able to change markets’ expectations about the European Central Bank cutting interest rates earlier than at least the second half of this year.

Today the spotlight turns to the decision of the results of the FOMC meeting in the US. While the weight is in favor of keeping current interest rates unchanged.

While the greatest focus remains on the speech of Federal Reserve Chairman Jerome Powell, and looking for signals in his speech about the next steps regarding monetary policy and the extent of monetary policy makers’ optimism about the progress achieved in returning inflation to its target.

However, a more dovish tone than expected may reinforce markets’ expectations of the possibility of an interest rate cut for the first time in June as well, and this may be a supportive factor for the euro today. While the markets favor this possibility by 60%, compared to 36% to keep the current rates as they are, according to CME FedWatch Tool.

In the bond markets, the euro would have been subject to further decline today with the decline in Eurozone bond yields after an upward trend that continued for more than a week, but a similar decline in US Treasury bonds in anticipation of today’s developments had modified this effect.