EUR/USD Soft Ahead of Central Bank Blitz
EUR/USD Analysis
After clinching new 2023 highs, the pair now slips as markets contemplate a series of factors and their potential impact on the upcoming monetary policy decisions by the US Fed (Wednesday) and the European Central Bank (Thursday).
US PCE Inflation moderated in March based on last week's report, but remains elevated, while the economy grew by just 1.1% in the first quarter according to preliminary data. Financial stress remains in the system meanwhile, as the troubled First Republic Bank disclosed massive deposit outflows, with regulators seizing the institution and selling the bulk of its assets to JP Morgan Chase yesterday. [1]
Fed officials will have to grapple with the above news before delivering their decision, against a volatile backdrop. Their March projections imply one more hike before pausing [2], whereas persistent inflation and strong labor market put pressure for sustained restrictive policy stance.
On the other side of the Atlantic, Eurozone managed to eke out 0.1% growth q/q in the first quarter according to Friday's first reading. Today preliminary inflation report showed that headline CPI ticked up in April (7% y/y), while the sticker core inflation inched down (5.6% y/y).
This creates a murky background as markets try to assess the ECB's next move. The central bank has been very hawkish and is widely expected to hike rates again, but the size and forward guidance are less clear. A Reuters poll showed that economist project a slowdown to 0.25%, but a bigger move cannot be ruled out. [3]
EUR/USD slides this week and risks moving below the EMA200 (black line) that would make it vulnerable to the daily Ichimokou cloud. However the downside contains many support levels, with the ascending trend line from the 2022 lows following (at around 1.0690).
The common currency is at the driver's seat above the EMA200 but fresh catalyst will be required for breaking fresh ground and challenging 1.1233. The pair's trajectory will be determined by the outcome of the Fed & ECB meetings.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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