EURUSD higher post PCE and ahead of EZ GDP

Euro data points to continued weakness
Eurozone confidence data came in mostly weaker than forecast with economic sentiment at the lowest level since 2016, showing that the bloc’s economy is still bogged down. 

The euro will remain in focus as investors look ahead to a barrage of data due be released from the bloc tomorrow. Expectations are for 1.1% growth yoy and 0.3% growth qoq, up from 0.2% amid fewer global headwinds and upbeat services activity. However, these figures could be overly optimistic given that the German manufacturing pmi was down at 44.1.

A strong GDP reading could see the EUR/USD climb back towards $1.12. A miss could see the euro retest year to date lows.

Dollar dips post PCE reading
The dollar put its recent rally on hold following US inflation data. PCE, the Fed’s preferred measure of inflation showed that prices declined to 1.6% in April, down from a downwardly revised 1.7% in March and below the 1.7% forecast. The data comes following Friday’s mixed GDP data. A GDP release that saw the headline figure demonstrating impressive growth of 3.2%. However, this was driven principally by a large accumulation of unsold merchandise, as the inventory component of the report was high and consumer spending noticeably weak. 

Weak inflation and “the not quite as impressive as the headline figures suggest” GDP report are unlikely to encourage the Fed to take their finger off the pause button, even though other data across the month, such as retail sales, home sales and manufacturing have all seen improvements. According the CME Fed funds, the market is still pricing in a 65% probability of a rate cut before the end of the year. This is keeping the dollar under pressure ahead of the US Federal Reserve rate announcement on Wednesday. 


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.