The European currency regains the smile and encourages EUR/USD to revisit the 1.1050 region at the end of the week.
EUR/USD focuses on the US docket
EUR/USD manages to regain buying interest and maintains the multi-week uptrend in place since mid-March, which has so far met decent resistance near the 1.1100 zone.
In the meantime, investors continue to adjust to Thursday’s hawkish message from the ECB, which now appears reinforced by earlier comments from Board members Simkus and Müller, who advocated for extra rate hikes at the next meetings.
Still around the ECB, the Survey of Professional Forecasters (SPF) for Q2 revised the inflation projections and now sees the HICP rising 5.6% in 2023 and 2.6% in 2024 vs. 5.9% and 2.7%, respectively. Additionally, the SPF predicts the economy in the euro region to expand by 0.6% this year and 1.2% in 2024 vs. 0.2% and 1.4%, respectively.
In the domestic calendar, Retail Sales in the euro bloc contracted by 3.8% in the year to March, while the Construction PMI in Germany receded to 42.0 in April (from 42.9).
What to look for around EUR
EUR/USD picks up some pace and leaves behind part of the moderated pullback seen in the wake of the ECB gathering on Wednesday.
The movement of the euro’s value is expected to mirror the behaviour of the US Dollar closely. It will likely be impacted by any differences in approach between the Fed and the ECB regarding their plans for adjusting interest rates.
Moving forward, hawkish ECB-speak continues to favor further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.
This week’s key euro events include Germany Construction PMI and EMU Retail Sales.
Eminent issues on the back boiler: Continuation (or not) of the ECB hiking cycle. Impact of the Russia-Ukraine War on the region’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.
EUR/USD levels to watch
So far, the pair is up 0.17% at 1.1027, and the surpass of 1.1095 (2023 high April 26) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21, 2022). In opposition, the next support is seen at 1.0941 (monthly low May 2), followed by 1.0909 (weekly low April 17), and finally 1.0831 (monthly quiet April 10).