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- EUR/USD rose to 1.08800 after better than expected EU CPI inflation.
- The pair returns to the opening quotes of the week ahead of the close.
- Coming next week: EU and US PMIs, ECB interest rate call, and US non-farm payrolls.
EUR/USD struggled to make headway on Friday, spreading near 1.0850 as the major pair heads to a close near the opening bids for the week on Monday. Inflation in the European Harmonized Index of Consumer Prices (HICP) rose faster than expected in May, while inflation in the US Personal Consumption Expenditures price index slowed faster than expected in April. Next week will bring heavy data, with Purchasing Managers’ Index (PMI) numbers on both sides of the Atlantic followed by an expected interest rate call from China. European Central Bank (ECB) And another edition of the US Non-Farm Payrolls (NFP) report next Friday.
Pan-European core inflation (HICP) rose 2.9% month-on-month in May, above the average market expectation of 2.8% and extending from 2.7% in the previous month. A severe negative error in German Retail In April, the euro’s gains were limited after consumer activity fell by -1.2% m/m versus -0.1% expected. However, the previous period saw a sharp upward revision to 2.6% from the initial reading of 1.8%.
The EUR/USD pair rose to an intraday high above 1.0880 in European markets, but retreated during the US market session after US PCE inflation fell to 0.2% monthly in April. This figure came in below expectations of 0.3%, driven by sharp easing in US personal spending figures, which fell to 0.2% compared to expectations of 0.3% and fell further from the previous revised reading of 0.7%.
The ECB meets next week for another interest rate call, and markets are increasingly anticipating an initial quarter-point rate cut from EU central planners after the ECB steadily raised the rate for key refinancing operations from 0.0% in June 2022 to 4.5% in September of 2023.
The US ISM PMI numbers for May are expected to recover next Monday to 49.8 from 49.2. Next Friday US Nonfarm Payrolls Employment numbers are looming, and the average market forecast currently expects 180,000 net jobs to be added to the US labor market in May.
Technical forecast for the EUR/USD pair
EUR/USD spent the week consolidating around an intermediate range near 1.0850 as the pair moves north of the 200-day EMA at 1.0793. The daily candlesticks are showing a sign of bullish exhaustion and the pair may be on the verge of a downward breakdown towards the 1.0600 level. Despite a 2.8% recovery from the recent swing low, EUR/USD is still -1.6% lower than its 2024 opening bids near 1.1035.
