- EUR/USD climbs above 1.0780 amidst improved risk appetite, with investors eyeing the European Central Bank’s (ECB) anticipated interest rate reduction in June.
- Market sentiment supports the currency pair’s gains, as traders anticipate earlier and more aggressive rate cuts by the ECB compared to the Federal Reserve (Fed).
Speculation suggests the ECB may lower rates by 70 basis points this year, commencing as early as the June meeting. Conversely, expectations for the Fed point towards a rate reduction starting in September, with a projected decrease of 45 basis points by year-end.
The Euro’s trajectory this week will be influenced by Eurozone Q1 preliminary Gross Domestic Product (GDP) data, scheduled for release on Wednesday. Analysts anticipate steady quarterly growth of 0.3% and annual growth of 0.4%, as reported by Eurostat. This data will offer insights into the Eurozone’s economic prospects. Additionally, EUR/USD will react to the US Consumer Price Index (CPI) data for April, also set to be published on Wednesday.
Daily digest market movers: EUR/USD gains ahead of crucial Eurozone, US economic data
- EUR/USD maintains its upward momentum near 1.0780 amid positive market sentiment. S&P 500 futures show marginal gains during the European session, reflecting investor resilience ahead of the release of the United States Consumer Price Index (CPI) data for April on Wednesday.
- Economists predict a decrease in annual headline inflation to 3.4% from March’s 3.5%, while the annual core CPI, excluding volatile food and energy prices, is anticipated to ease to 3.6% from the previous 3.8%. Monthly headline and core inflation are also expected to slow to 0.3% from the prior 0.4%.
- The forthcoming US consumer inflation data will significantly impact market expectations for Federal Reserve rate adjustments, currently anticipated to commence from the September meeting. The CME FedEWatch tool indicates a 61% likelihood of interest rate cuts from the current range of 5.25%-5.50%.
- Prior to the US CPI data, investors will turn their attention to the US Producer Price Index (PPI) data for April, scheduled for release on Tuesday. This data will provide insights into whether businesses have adjusted prices of goods and services at their premises.
- The US Dollar Index (DXY), tracking the Greenback against six major currencies, remains subdued near 105.30 during Monday’s European session. Last week, the US Dollar faced pressure following a notable increase in Initial Jobless Claims for the week ending May 3, undermining investor confidence in the strength of the US labor market.
Technical Analysis: EUR/USD plays around 200-day EMA
EUR/USD rebounds from Friday’s losses, advancing to 1.0780, nearing the 200-day Exponential Moving Average (EMA) positioned around the same level.
The currency pair is steadily approaching the downward-sloping boundary of a Symmetrical Triangle pattern observed on the daily timeframe, delineated from the December 28 high near 1.1140. Meanwhile, the upward-sloping boundary stems from the October 3 low at 1.0448. This pattern signifies a notable contraction in volatility.
Within this context, the 14-period Relative Strength Index (RSI) fluctuates within the 40.00-60.00 range, indicating a lack of clear direction among market participants.
