EUR/USD – Eurozone CPI jumps but euro loses ground

EUR/USD is pointing lower for a third straight day. Currently the pair is trading at 1.1156, down 0.15% on the day. On the release front, eurozone CPI Flash Estimate improved to 1.7% in April, up from 1.4% a month earlier. The core release climbed to 1.2%, compared to 0.8% in March. Both indicators beat their estimates. In the U.S., the focus is on employment numbers. Nonfarm payrolls is expected to slow to 181 thousand. Will we see a repeat performance of the ADP release, which also was expected in at 181 thousand but soared to 275 thousand? Wage growth is expected to climb to 0.3% in April, after a negligible gain of 0.1% a month earlier.

Eurozone inflation is expected to climb to 1.7% in April, marking a 5-month high. The stronger reading is a reflection of higher oil prices, which has pushed prices higher. Inflation is moving closer to the ECB target of close to 2 percent, and if the upward trend continues, ECB rate-setters will have to give some thought to raising interest rate levels. The bank recently announced that no rate hikes were planned before the spring of 2020, and this dovish stance has made the euro less attractive to investors.

The Federal Reserve maintained the benchmark rate, as expected. The rate statement noted that inflation pressures are muted and that the FOMC would remain patient regarding future rate movements. Jerome Powell reinforced this stance at a follow-up press conference, saying “we don’t see a strong case for moving in either direction”. The Fed is already on record as saying it does not expect to raise rates before 2020, and with inflation levels persistently below the Fed’s target of 2.0%, the Fed can afford to continue its wait-and-see stance.

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EUR/USD Fundamentals

Friday (May 3)

• 5:00 Eurozone CPI Flash Estimate. Estimate 1.6%. Actual 1.7%
  
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 1.2%
  
• 5:00 Eurozone PPI. Estimate 0.0%. Actual -0.1%
  
• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 181K
• 8:30 US Unemployment Rate. Estimate 3.8%
• 8:30 US Goods Trade Balance. Estimate -73.0B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.2%
• 9:45 US Final Services PMI. Estimate 52.9
• 10:00 US ISM Non-Manufacturing PMI. Estimate 57.2
• 10:15 US FOMC Member Evans Speaks
• 11:30 US FOMC Member Clarida Speaks
• 13:45 US FOMC Member Williams Speaks
• 15:00 US FOMC Member Bowman Speaks
• Tentative – US Treasury Currency Report
• 19:45 US FOMC Member Bullard Speaks

*All release times are DST

*Key events are in bold

EUR/USD for Friday, May 3, 2019

EUR/USD for May 3 at 6:20 DST

Open: 1.1172 High: 1.1178 Low: 1.1152 Close: 1.1157

EUR/USD Technical

EUR/USD was flat in the Asian session and is slightly lower in European trade

• 1.1120 is providing support
• 1.1212 is the next line of resistance
• Current range: 1.1120 to 1.1212

Further levels in both directions:

• Below: 1.1212, 1.1120, 1.1046 and 1.0950
• Above: 1.1300, 1.1434 and 1.1553

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