The euro is falling on Wednesday. EUR/USD is down 0.04% and trading at 1.0825 in European trading at the time of writing.
Eurozone GDP increases and industrial production eases
The euro area economy recovered in the first quarter. GDP increased by 0.3% from the previous quarter, up from minus 0.1% in the first quarter. Annualized GDP growth rate was 0.4%, up from 0.1% in the first quarter.
Industrial production rose 0.6% month-on-month in March, slightly exceeding market expectations of 0.6% after rising by a revised 1% in February. Industrial production fell by 1% annually, following February's revised figure of -6.3% and exceeding market expectations of -1.2%. Recent announcements point to improvements in the euro area economy, with demand remaining strong. Similarly, demand for exports to the euro area is increasing as the Chinese economy improves.
US inflation expected to ease
All eyes are on today's US CPI report, which could shake up the US dollar. The headline CPI in April is expected to be 3.4% year-on-year, down from 3.5% in March. Monthly headline CPI is expected to remain unchanged at 0.4%. Core CPI, a better indicator of inflation trends, is expected to fall from 3.8% to 3.6% year-on-year and from 0.4% to 0.3% on a monthly basis.
Federal Reserve Chairman Jerome Powell said Tuesday that inflation is falling more slowly than expected and that the central bank intends to be patient and “make restrictive policy work.” Chairman Powell's comments appear to be aimed at dampening market excitement if the CPI falls below expectations.
Money markets widely expect the Fed to keep interest rates unchanged at its June meeting, with rate cuts priced in by 32% in July and 67% in September, according to the CME FedWatch tool. As of January, the market had priced in six interest rate cuts, but expectations for a rate cut have diminished due to the strong US economy and rising inflation.
EUR/USD technical
- EUR/USD is putting pressure on the 1.0842 resistance level. Above, there is resistance at 1.0863.
- 1.0804 and 1.0783 are supported
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