EUR/USD Heading for 1.10 Despite Lower Eurozone Inflation Expectations
Today the producer inflation and the consumer inflation expectations for the Eurozone came in pretty weak, but EUR/USD continues toward 1.10
Stocks have continued to perform well in April trading, with European indices such as the DAX and CAC 40 hitting fresh highs for the year. US futures are also rising, following a tentative handover from Asia. Central bank action was also in focus, with the Reserve Bank of Australia (RBA) and Bank of Canada (BOC) both leaving interest rates unchanged.
The RBA made a subtle change to its policy guidance, hinting at a potential peak in rates, which caused AUD/USD to fall in European trading. The US dollar is struggling, with EUR/USD threatening short-term resistance at 1.0920-30 before settling closer to 1.0900. The pound is the standout performer, rising to fresh highs since June last year in a push to 1.2500 before retreating slightly. It appears to be acting like a risky currency.
Producer Price Inflation Report from Eurostat – 4 April 2023
- February PPI -0.5% vs -0.3% m/m expected
- January -2.8%
- PPI +13.2% vs +13.3% y/y expected
- Prior +15.0%; revised to +15.1%
The monthly decline in producer prices was largely due to lower energy prices, which fell by 1.6%. If energy prices are excluded, overall producer prices actually increased by 0.2% for the month. This increase was driven by higher prices for capital goods (+0.3%), durable consumer goods (+0.4%), and non-durable consumer goods (+0.6%). However, there was a slight drop in intermediate goods (-0.1%), which offset some of these gains.
According to a survey conducted by the European Central Bank (ECB), Eurozone consumers’ median inflation expectations for the next 12 months fell from 4.9% in January to 4.6% in February. This suggests that consumers are becoming more optimistic about the inflation outlook. The survey also showed that consumers’ expectations for economic growth in the year ahead improved, with the anticipated growth rate being -0.9% in February, up from the -1.2% reading in January. The ECB survey is based on responses from 14,000 adults in six of the Eurozone’s largest economies.
EUR/USD Live Chart
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