EUR/USD - Euro gains ground as investor confidence improves
The Eurozone economy continues to recover, but there is plenty of work ahead. The Sentix Investor Confidence index improved to -8.7 in April, above the March read of -11.1 and better than the estimate of -11.7 points. The concerns over an energy crisis in Europe this winter failed to materialize and Germany and the rest of the eurozone came out of the winter better than many had expected, given the weak global economy and the Russia-Ukraine war. Still, the economic outlook remains pessimistic, as Sentix Investor Expectations remain negative in both Germany and the eurozone, at -13 and -11.5, respectively. Still, the markets were pleased with the slight improvement in investor confidence and the euro has responded with gains of around 0.60%.
Eurozone retail sales slipped to -0.8% in February, matching the forecast but contracting after an upwardly revised 0.8% gain in January. Consumers are struggling with high inflation, rising interest rates and uncertain economic conditions and are keeping a tight grip on their wallets and purses.
The ECB meets next on May 4th and all indications are that it will deliver another oversize rate hike. The central bank has been aggressive, raising rates by 50 and 75 basis points in recent months. The ECB was very slow to join the rate-hiking party and the benchmark rate is only 3.50%, compared to 4.25% for the Bank of England and 5.00% for the Federal Reserve. Inflation in the eurozone has proven to be a tougher foe than expected, and core inflation surprised by accelerating in February.
The US releases the March inflation report on Wednesday. Inflation has been falling, albeit at a slower pace than the Fed had expected. This has necessitated additional rate hikes, with a 25-bp increase expected at the May meeting. Headline inflation is expected to fall to 5.4% in March, down from 6% in February. The core rate is projected to inch higher to 5.6%, up from 5.5%.
EUR/USD is testing support at 1.0889. Below, there is support at 1.0804
There is resistance at 1.0989 and 1.1074
Eurozone retail sales slipped to -0.8% in February, matching the forecast but contracting after an upwardly revised 0.8% gain in January. Consumers are struggling with high inflation, rising interest rates and uncertain economic conditions and are keeping a tight grip on their wallets and purses.
The ECB meets next on May 4th and all indications are that it will deliver another oversize rate hike. The central bank has been aggressive, raising rates by 50 and 75 basis points in recent months. The ECB was very slow to join the rate-hiking party and the benchmark rate is only 3.50%, compared to 4.25% for the Bank of England and 5.00% for the Federal Reserve. Inflation in the eurozone has proven to be a tougher foe than expected, and core inflation surprised by accelerating in February.
The US releases the March inflation report on Wednesday. Inflation has been falling, albeit at a slower pace than the Fed had expected. This has necessitated additional rate hikes, with a 25-bp increase expected at the May meeting. Headline inflation is expected to fall to 5.4% in March, down from 6% in February. The core rate is projected to inch higher to 5.6%, up from 5.5%.
EUR/USD is testing support at 1.0889. Below, there is support at 1.0804
There is resistance at 1.0989 and 1.1074
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