The euro edged up slightly on Friday after the euro zone's consumer price index came in better than expected. EUR/USD was trading at 1.0848 in the European session, up 0.27% from the previous day.
Eurozone inflation accelerated in April
Eurozone inflation surprised markets with stronger-than-expected results in May. The headline figure rose to 2.6% year-on-year, up from 2.4% in the previous two months and above market expectations of 2.5%. Energy and services prices rose, while food inflation moderated slightly. Core CPI rose to 2.9% in May, up from 2.7% in April and above market expectations of 2.8%.
Will the report on soaring inflation deal a blow to the European Central Bank's plans to cut interest rates next week? Probably not. The ECB has sent strong signals to cut rates and changing course now would not be well received by markets. The May inflation report came in better than expected, but the increase was largely due to temporary factors, including changes to the cost of public transport in Germany.
Still, inflation was higher in Germany, France and Spain in May, pointing to a bumpy path to the ECB's 2% target.The ECB has lowered its inflation rate to below 3% from a 2022 high of 10.6%, so a rate cut would reassure consumers and help boost the struggling euro zone economy.
In the US, the week will close with the release of the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures Price Index. The index is expected to be unchanged at 2.7% year-on-year and 0.3% month-on-month. Any surprise reading could spark some EUR/USD movement in the North American session.
EUR/USD Technical
- EUR/USD is under pressure at the resistance at 1.0855, above which there is resistance at 1.0879.
- The next support levels are 1.0822 and 1.0798
The content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions expressed are those of the author and not necessarily those of OANDA Business Information & Services, Inc. or its affiliates, subsidiaries, officers or directors. If you wish to reproduce or redistribute content found on MarketPulse, the award-winning forex, commodities and global index analysis and news site service produced by OANDA Business Information & Services, Inc., please access our RSS feed or contact us at info@marketpulse.com. For more information on trends in global markets, visit https://www.marketpulse.com/. © 2023 OANDA Business Information & Services Inc.
