EUR/USD – Euro Steady as Eurozone CPI Matches Forecast

EUR/USD is almost unchanged on Wednesday, following gains in the Tuesday session. Currently, the pair is trading just above the 1.07 level. On the release front, Eurozone Final CPI came in at 1.5%, matching the forecast. The Eurozone trade surplus jumped to EUR 19.2 billion, above the estimate of EUR 18.6 billion. There are no major US releases on the schedule. On Thursday, the US releases the Philly Fed Manufacturing Index and unemployment claims. As well, US Treasury Secretary Steven Mnuchin will speak at event in Washington.

Eurozone consumer inflation indicators dropped in March, but matched the forecasts. Eurozone Final CPI slipped to 1.5%, compared to 2.0% a month earlier. The indicator has been steadily rising, and climbed to 2.0% in February, which is the ECB’s inflation target. This had led to speculation that the ECB might have to consider tightening its monetary policy, either by lowering interest rates or tapering its asset-purchase program (QE). The ECB’s asset-purchase program is scheduled to remain in place until December, although the central bank could opt to bring up that date or taper the program if growth and inflation numbers in the Eurozone are unexpectedly strong. There are also political considerations at play, as the ECB is reluctant to make any significant monetary moves with upcoming elections in France and Germany.

Investors are closely following the French presidential election, with the first round of voting on April 23. The race remains extremely tight, with centrist Emmanuel Macron and far-right candidate Marine Le Pen tied at 22 percent. They are followed by center-right Francois Fillon at 21% and far-left Jean-Luc Melenchon at 18 percent. If Macron and Le Pen reach the second round, Macron is expected to win decisively by a margin of 64-36. With only a few days to go before the vote, polling numbers will be closely watched, and any significant changes in the polls could impact on the euro.

The Federal Reserve has broadly hinted that it plans two more rate hikes in 2017. There have been calls from some Fed policymakers to raise rates three more times, but this seems unlikely, given disappointing retail sales and CPI numbers in March. These weak numbers are likely to make the Fed more dovish, and prompted the Atlanta and New York Federal Reserve banks to lower their outlook for US economic growth for the first quarter of 2017. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but this has not translated into stronger consumer spending, a key driver of economic growth. What can we expect next from the Fed? The odds of a rate hike in June are currently priced at 45%, according to the CME Group, down sharply from 65% earlier in April.

Wednesday (April 19)

• 4:04 Italian Trade Balance. Estimate 2.24B. Actual 1.88B
• 5:00 Eurozone Final CPI. Estimate 1.5%. Actual 1.5%
• 5:00 Eurozone Final Core CPI. Estimate 0.7%. Actual 0.7%
• 5:00 Eurozone Trade Balance. Estimate 18.6B. Actual 19.2B
• Tentative – German 30-y Bond Auction
• 10:30 US Crude Oil Inventories. Estimate -1.0M
• 14:00 US Beige Book

Thursday (April 20)

• 8:30 US Philly Fed Manufacturing Index. Estimate 25.6
• 8:30 US Unemployment Claims. Estimate 241K
• 13:15 US Treasury Secretary Steven Mnuchin Speech

*All release times are EST

*Key events are in bold

EUR/USD for Wednesday, April 19, 2017

EUR/USD April 19 at 6:20 EST

Open: 1.0727 High: 1.0737 Low: 1.0711 Close: 1.0711

EUR/USD Technical

EUR/USD has been flat in the Asian and European sessions

• 1.0708 switched to a support level following gains by EUR/USD in the Tuesday session
• 1.0873 is the next resistance line

Further levels in both directions:

• Below: 1.0708, 1.0616 and 1.0506
• Above: 1.0873, 1.0985 and 1.1122
• Current range: 1.0708 to 1.0873

OANDA’s Open Positions Ratio

EUR/USD ratio has posted strong gains towards short positions, consistent with gains by EUR/USD on Tuesday. Currently, long and short positions are almost evenly split, indicating a lack of trader bias as to what direction EUR/USD  will take next.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.