Euro steady after mixed Eurozone data, US CPI next

The euro is drifting on Wednesday. EUR/USD is down 0.04%, trading at 1.0825 in the European session at the time of writing.

Eurozone GDP rises, industrial production eases

The eurozone economy rebounded in the first quarter. GDP rose 0.3% q/q, up from -0.1% in the first quarter. Annually, GDP grew 0.4%, up from 0.1% in the first quarter.

Industrial production rose 0.6% m/m in March, after a revised 1% gain in February and just above the market estimate of 0.6%. Annually, industrial production declined by 1%, following a revised -6.3% in February and above the market estimate of -1.2%. Recent releases point to improvement in the eurozone economy, which is seeing stronger demand. As well, an improvement in China’s economy has increased the demand for eurozone exports.

US inflation expected to ease

All eyes are on today’s US CPI report, which could shake up the US dollar. Headline CPI is expected to drop to 3.4% y/y in April, down from 3.5% in March. Monthly, headline CPI is forecast to remain unchanged at 0.4%. Core CPI, which is a better indicator of inflation trends, is expected to ease from 3.8% y/y to 3.6%, and monthly from 0.4% to 0.3%.

Federal Chair Powell said on Tuesday that inflation is falling more slowly than expected and the Fed will remain patient and “let restrictive policy do its work”. Powell’s comments were likely aimed at dampening any market exuberance if CPI is lower than the estimate.

The money markets widely expect the Fed to hold rates at the June meeting, with a rate cut priced at 32% in July and 67% in September, according to the CME FedWatch tool. In January, the markets had priced in six rate cuts, but a strong US economy and rising inflation has slashed rate cut expectations.

EUR/USD technical

• EUR/USD is putting pressure on resistance at 1.0842. Above, there is resistance at 1.0863.

• There is support at 1.0804 and 1.0783.