Quick look:
- Publication of economic data: Key data on eurozone inflation and GDP will be released: inflation expected at 2.6% and GDP growth at 0.1%;
- EUR/USD dynamics: The currency pair struggles near 1.0731, with potential downside risk to levels like 1.0680 unless positive surprises occur;
- Comparative perspective: Market movements will depend on data from the Eurozone in relation to upcoming US economic updates, including decisions from the Federal Reserve.
As financial markets prepare for a crucial update on Europe's inflation and GDP, the EUR/USD pair is showing signs of fatigue. Struggling to maintain the bullish momentum that propelled it to two-week highs last Friday, anticipation surrounding the continent's next economic data release has left the currency pair looking like a tired boxer, barely managing to hold its ground. .
Economic data in focus: inflation and GDP outlook
This Tuesday is set to be a crucial day for the eurozone, as key economic indicators will shed light on the region's fiscal health. Market analysts are particularly focusing on eurozone core inflation, which they expect to register at 2.6% year-on-year. This represents a slight decrease from 2.9% in March, but remains above the European Central Bank's target of 2%. Furthermore, this data is especially significant after Germany's inflation figures published on Monday. These figures suggest that inflationary pressures could be more pronounced than previously anticipated. Consequently, this development introduces a potential upside risk to regional estimates. This is due to signs that peripheral nations may currently be outperforming Germany's economy.
Added to the economic picture is the preliminary estimate for the first quarter of GDP, which is expected to show a marginal growth of 0.1%. This represents a slight improvement over the stagnant growth recorded in the final quarter of 2024. Although modest, this growth points to a slow but steady recovery trajectory for the eurozone, reflecting resilience amid global economic uncertainties.
Currency dynamics and market movements
On the technical front, the EUR/USD pair is hesitant to establish a solid support point above the 1.0731 level. Momentum indicators suggest a possible reversal, unless offset by solid positive economic surprises. Furthermore, a series of lower highs and support levels, particularly 1.0680 and 1.0632, underline the pair's vulnerability. Consequently, merchants are closely monitoring potential violations.
On the contrary, attempts to break higher levels around 1.0731 towards 1.0753 have proven short-lived, reflecting the market's cautious sentiment.
The near-term path of EUR/USD will likely depend largely on the economic performance of the Eurozone relative to the U.S. This is especially true with critical U.S. data releases and Fed decisions Federal on the horizon later this week. These updates will include payrolls, Purchasing Managers' Indexes (PMI), Treasury refund details and the Federal Reserve's monetary policy decision. Each of these could significantly influence market dynamics.
As traders and investors navigate these turbulent waters, the interaction between upcoming European economic data and US economic indicators will be crucial. In fact, this interaction will play a key role in determining the short-term direction of the EUR/USD pair.
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