EUR/USD – Euro Edges Higher on Strong Eurozone CPI

EUR/USD has recorded gains in the Thursday session, continuing the upward movement seen on Wednesday. Currently, the pair is trading at 1.1682, up 0.17% on the day. On the release front, Eurozone CPI Flash Estimate jumped 1.9%, above the estimate of 1.6%. Core CPI Flash Estimate improved to 1.1%, above the estimate of 1.0%. In the US, little change is consumer inflation and spending indicators are expected to remain steady. Core PCI Price Index is forecast to gain 0.1%, and the estimate for Personal Spending is 0.4%. As well, unemployment claims are forecast to drop to 228 thousand. On Friday, Germany and the eurozone release manufacturing PMIs. In the U.S, the focus will be on job numbers, with the release of nonfarm payrolls and wage growth.

With Italy gripped in political turmoil, President Sergio Mattarella is looking for a way to avoid new elections, after an inconclusive election in March. The two largest parties, the League Nord and the Five Star Movement proposed a eurosceptic finance minister, but this was blocked by the pro-European Matterella. This triggered a political crisis which led to a selloff of Italian stocks and bonds. The prime minister-elect, Giuseppe Conte, then announced that he had withdrawn his mandate to form a government, and Mattarella invited Carlo Cottarelli, a former IMF economist, to form a temporary technocrat government. There was talk of an election in the fall or even earlier, but Mattarella has agreed to let the two parties again try and form a coalition government.

Eurozone inflation indicators flexed some muscle in May, boosting the euro on Wednesday. Eurostat is projecting a surge this month, with CPI Flash Estimate rising to 1.9%, its highest level since April 2017. Core CPI Flash Estimate improved to 1.1%, marking an 8-month high. Inflation levels are being closely watched by the ECB, which is scheduled to wind up its stimulus program in September. The ECB reduced its stimulus in January, from EUR 60 billion to 30 billion each month. Still, inflation remains well below the ECB target of around 2 percent.

German retail sales were unexpectedly strong in April, with a sharp gain of 2.3%. This reading ended a nasty streak of four declines. The gain is the strongest since December and raises hopes that second quarter growth will rebound after a sluggish first quarter. Inflation is also expected to improve, with German Preliminary CPI forecast to rise to 0.3% in May after a flat reading of 0.0% in April. The story in France, the second largest economy in the eurozone, was not as bright. Consumer spending plunged 1.5% in April, marking a 3-month low. Preliminary GDP fell to 0.2% in March, down from 0.6% a month earlier.


EUR/USD Fundamentals

Thursday (May 31)

  • 2:45 French Preliminary CPI. Estimate 0.3%. Actual 0.4%
  • 4:00 Italian Monthly Unemployment Rate. Estimate 10.9%. Actual 11.2%
  • 5:00 Eurozone CPI Flash Estimate. Estimate 1.6%. Actual 1.9%
  • 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 1.1%
  • 5:00 Italian Preliminary CPI. Estimate 0.2%. Actual 0.4%
  • 5:00 Eurozone Unemployment Rate. Estimate 8.4%. Actual 8.5%
  • 7:30 US Challenger Job Cuts
  • 8:30 US Core PCE Price Index. Estimate 0.1%
  • 8:30 US Personal Spending. Estimate 0.4%
  • 8:30 US Unemployment Claims. Estimate 228K
  • 8:30 US Personal Income. Estimate 0.3%
  • 9:45 US Chicago PMI. Estimate 58.2
  • 10:00 US Pending Home Sales. Estimate 0.4%
  • 10:30 US Natural Gas Storage. Estimate 100B
  • 11:00 US Crude Oil Inventories. Estimate -0.4M
  • 12:45 US FOMC Member Rafael Bostic Speaks
  • 13:00 US FOMC Member Lael Brainard Speaks

Friday (June 1)

  • 3:55 German Final Manufacturing PMI. Estimate 56.8
  • 4:00 Eurozone Final Manufacturing PMI. Estimate 55.5
  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 189K
  • 8:30 US Unemployment Rate. Estimate 3.9%
  • 10:00 US ISM Manufacturing PMI. Estimate 58.2

*All release times are DST

*Key events are in bold

EUR/USD for Thursday, May 31, 2018

EUR/USD for May 31 at 6:45 DST

Open: 1.1663 High: 1.1724 Low: 1.1648 Close: 1.1682

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1312 1.1418 1.1613 1.1718 1.1809 1.1915

EUR/USD was flat in the Asian session and has posted gains in European trade

  • 1.1613 has some breathing room in support following gains by EUR/USD on Thursday
  • 1.1728 was tested earlier in resistance. It could break on Thursday

Further levels in both directions:

  • Below: 1.1613, 1.1448, 1.1312 and 1.1212
  • Above: 1.1718, 1.1809 and 1.1915
  • Current range: 1.1613 to 1.1718

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement in the Thursday session. Currently, long positions have a majority (57%), indicative of trader bias towards EUR/USD continuing to move to higher ground.

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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.