EURUSD remains flat following the London Open despite the European Commission raising the EU growth forecast for 2023. The risk-averse market environment hasn’t helped keep any potential bullish move at bay ahead of the US inflation and EU GDP data releases tomorrow.
The European Commission noted that the EU economy entered 2023 on a better footing than projected in Autumn and lifted their growth outlook to 0.9% in the Euro Area. The Euro Area looks set to avoid a technical recession thanks largely to declining gas prices and a robust labor market.
The Commission also downgraded its inflation expectations, with headline inflation now expected to fall to 5.6% in 2023. Meanwhile, ECB policymakers Centeno and de Guindos were largely positive in comments made this morning. Both discussed positives around the inflation outlook moving forward, stating that rate hikes beyond March will remain data dependent.
The University of Michigan released its preliminary consumer sentiment survey, which indicated an uptick in the one-year inflation expectations with a print of 4.2%, up from 3.9% in January. This does not bode well for US inflation data, while wage growth remains a problem due to a tight labor market.
Later today, we have Federal Reserve Policymaker Michelle Bowman with more hawkish rhetoric likely to add a bit of pressure on EURUSD. However, I expect any major moves on the pair to remain on hold until tomorrow’s US inflation print and GDP growth rate figures out of the Euro Area.
From a technical perspective, last week’s breakout of the ascending channel does hint at a downside for EURUSD, with the weekly candle close adding credence to the idea that further losses are in store for the pair.
The short-term outlook is a bit more mixed as we have bounced off the daily low printed in the Asian session around 1.0655. A push slightly higher to retest the lower end of the ascending channel at 1.0745 cannot be ruled out before EURUSD continues its downside move with support at 1.0645 and lower the 1.0600 handles.
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