The latest data for the Fed's preferred measure of Inflation were released on Thursday, showing a 5.4% jump year-over-year in Core Personal Consumption Expenditures (PCE) in March, marking the highest level since April 1983.
The war in Ukraine and Western sanctions against Russia put upward pressure in the already high post-pandemic consumer prices. This led the Fed to hike interest rates last month, for the first time since 2018.
Earlier today, we got an update from Eurozone, with the preliminary reading of the Consumer Price Index (CPI) for March. Headline Preliminary CPI climbed 7.5% year-over-year in March, compared to final 5.9% year-over-year reading in February.
The European Central Bank (ECB) is far behind its US counterpart in policy normalization, but last month it announced a faster tapering of its QE, which is now expected to conclude in the third quarter - potentially opening the door for a rate increase within the year.
The pair dropped on Thursday and today it stays on the back foot, rejecting the 50% Fibonacci of the 2022 High/Low drop. It also returns back below the EMA200 and the Relative Strength Index (RSI) crosses below the 50 mark. These factors maintain near-term risk tilted to the downside, although moves below 1.0901 will likely require a catalyst.
Despite that, the common currency tries for weekly gains thanks to the solid start to it and another test of 1.1150 would not bee surprising, but we remain cautious about its ability to push for and beyond 1.1233.
Markets now await the US Jobs Report (12:30 GMT), which has the potential to increase volatility and affect the pair's trajectory.
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.