The euro has edged higher on Thursday, after posting losses in two consecutive sessions.
The markets were treated to a data dump out of the Eurozone, with some mixed numbers. On the employment front, the Eurozone unemployment rate fell to 6.6%, down from 6.8% (6.7% exp.). Germany reported 133,000 newly unemployed, a huge increase, but this reading was an anomaly due to the influx of Ukrainian refugees into the labour market. German retail sales for May bounced back with a modest gain of 0.6%, after a dismal 5.4% slide in April.
Eurozone Inflation Expected To Accelerate
Investors are keenly awaiting Eurozone CPI for June, which is expected to hit 8.4%, up from 8.1% in May. With no inflation peak in sight and the European Central Bank revising downwards its growth forecast, the spectre of stagflation in the bloc remains very real. At the ECB forum this week, president Christine Lagarde sounded hawkish and downplayed concerns about a recession, although there is good reason to be sceptical about her optimism. Inflation continues to hammer away at consumers and businesses. The energy situation with Russia continues to deteriorate and the standoff between Russia and the West is only getting worse, with Finland and Sweden applying to join NATO and the Ukraine war grinding on.
In the U.S., there was some good news for a change on the inflation front. The Fed’s preferred inflation gauge, the Core PCE Price index, was unchanged at 0.3% MoM in May, a notch below the estimate of 0.4%. However, earnings dropped sharply to 0.2% in May, compared with 0.9% in April. This could be a sign of the toll the cost of living crisis is taking on U.S. consumers. Federal Reserve Chair Jerome Powell has downplayed the likelihood of a recession in the U.S., but as is the case with Lagarde, many market participants are less optimistic.
EUR/USD Technical
- EUR/USD is testing resistance at 1.0482. Above, there is resistance at 1.0544
- There is support at 1.0408 and 1.0346
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