- EUR/USD dipped into multi-week lows after an unexpected uptick in US CPI inflation.
- European February ZEW Economic Sentiment Survey improved.
- European GDP growth, US Retail Sales in the pipe for the midweek.
EUR/USD tumbled 0.9% on Tuesday after US Consumer Price Index (CPI) inflation came in above market expectations. Money markets’ expectations of rate cuts from the Federal Reserve (Fed) got knocked back as US inflation proves stickier than investors were hoping for.
Europe saw a slight improvement in the ZEW Economic Sentiment Survey for February, and Euro (EUR) traders will be gearing up for European Gross Domestic Product (GDP) figures due on Wednesday. Thursday will follow up with more US economic data with US Retail Sales expected to slow in January.
Daily digest market movers: EUR/USD gets a sharp rebalance on safe-haven flows into US Dollar
- MoM US CPI inflation ticked up to 0.3% in January versus the forecast 0.2%.
- December’s monthly CPI saw a slight revision down from 0.3% to 0.2%.
- Core MoM CPI also ticked up to 0.4% from the forecast steady hold of 0.3%.
- Annualized headline CPI inflation printed at 3.1%, above the forecast 2.9% but still easing slightly from the previous period’s 3.4%.
- Money markets are now pricing in a first rate cut from the Fed in June or July after getting knocked off of a March rate trim bet.
- The euro area ZEW Economic Sentiment survey for February improved to 25.0 from the previous 22.7, reversing the forecast decline to 20.1.
- Wednesday’s European GDP is expected to hold flat at 0.0% for the fourth quarter.
- Annualized European quarterly GDP is forecast to hold steady at a scant 0.1%.
- European Central Bank (ECB) President Christine Lagarde makes an appearance early Thursday.
- ECB President Lagarde will be testifying before the European Parliament’s Committee on Economic and Monetary Affairs in Brussels.
- Thursday also sees US Retail Sales, and investors are hoping for January’s retail activity to tick down -0.1% versus the previous month’s 0.6%.
Euro price today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.59% | 0.30% | 0.95% | 1.20% | 0.92% | 1.24% | 1.26% | |
| EUR | -0.60% | -0.29% | 0.35% | 0.62% | 0.33% | 0.65% | 0.68% | |
| GBP | -0.31% | 0.28% | 0.65% | 0.90% | 0.61% | 0.94% | 0.96% | |
| CAD | -0.95% | -0.36% | -0.64% | 0.24% | -0.03% | 0.30% | 0.32% | |
| AUD | -1.22% | -0.62% | -0.91% | -0.25% | -0.29% | 0.04% | 0.09% | |
| JPY | -0.92% | -0.31% | -0.61% | 0.02% | 0.31% | 0.33% | 0.35% | |
| NZD | -1.26% | -0.67% | -0.95% | -0.29% | -0.04% | -0.33% | 0.01% | |
| CHF | -1.31% | -0.71% | -1.00% | -0.33% | -0.12% | -0.38% | -0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Technical analysis: EUR/USD falls into multi-week lows, approaches 1.0700
EUR/USD tumbled on Tuesday, knocking into eight-week lows and coming with reach of 1.0700 as the pair continues to drift into the bearish side. The EUR/USD saw a sharp technical rejection of the 200-hour Simple Moving Average (SMA) near 1.0780 early Tuesday. Previous technical support at the 1.0725 turnaround zone is poised to form a near-term technical ceiling for bullish recoveries.
The EUR/USD continues to drift into deeper bear country below the 200-day SMA near 1.0830, and continued downside momentum below 1.0700 sets the pair up for an extended slide into last October’s lows near 1.0450.
EUR/USD hourly chart
EUR/USD daily chart![]()
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Read the full article here