The EUR/USD pair remains steady in the mid-1.0900s, retracing from its recent peak at 1.0981 reached last week. As both sides of the currency pair brace for the impact of upcoming data releases and events, market participants anticipate potential volatility in the near term.
In the United States, attention is focused on the release of factory gate inflation and Retail Sales data, which could influence expectations regarding the timing of potential interest rate cuts by the Federal Reserve (Fed). The performance of the US Dollar (USD) is likely to be influenced by these key economic indicators.
Meanwhile, in Europe, several rate-setters from the European Central Bank (ECB) are scheduled to deliver speeches, providing insights into the central bank‘s stance on interest rates. The comments from ECB officials are expected to offer clarity on whether the ECB will opt for interest rate cuts in April or June, thereby impacting the Euro (EUR).
The prevailing sentiment suggests that if inflation remains stubbornly high, interest rates are likely to be maintained at elevated levels, thereby supporting the respective currency.
US Data Releases and Euro-Speak Influence Market Sentiment
US core factory gate prices, as indicated by the Producer Prices ex Food and Energy (Core PPI), are set to be released at 12:30 GMT. Economists anticipate a slight drop to 1.9% year-on-year (YoY) from the 2.0% recorded in January, with a 0.2% month-on-month (MoM) increase projected compared to the 0.5% advance seen previously.
Additionally, the headline Producer Price Index (PPI) is forecasted to show a 1.1% YoY gain, up from 0.9% in January, with a 0.3% MoM increase. Given that PPI influences base costs feeding into the Consumer Price Index (CPI), the data assumes significance as higher wholesale prices often translate into increased consumer prices.
Simultaneously, US Retail Sales data, also scheduled for release at 12:30 GMT, is expected to rebound in February with a 0.8% rise, following a decline of 0.8% in January. Higher-than-expected retail sales figures typically spur inflation, thereby impacting interest rate policies and subsequently, the USD.
ECB Speakers Provide Insights on Rate Decisions
The ECB’s stance on interest rates is further elucidated by speeches from key members. ECB Governing Council member Francois Villeroy de Galhau’s dovish remarks on Monday hinted at a potential interest rate cut in April. Conversely, Bank of Austria Governor Robert Holzmann suggested a more likely cut in June, a sentiment echoed by ECB President Christine Lagarde.
Thursday’s schedule includes speeches from ECB Executive Board members Frank Elderson at 9:30 GMT and Isabel Schnabel at 11:00 GMT, followed by ECB Vice-President Luis de Guindos at 18:00 GMT. Market participants keenly observe these speeches for indications of the ECB’s future monetary policy decisions.
Technical Analysis: EUR/USD Correction Continues
EUR/USD remains in correction mode following its peak at 1.0981 on March 8. Despite lacking momentum, Wednesday’s upward movement suggests the pair is retracing within a dominant short-term uptrend rather than signaling a reversal.
A potential support zone lies between 1.0898 (February 2 high) and the top of the Measured Move’s A wave at 1.0888. A breach below 1.0867 would strengthen the case for a trend reversal, signaling increased bearish control.
Conversely, a break above 1.0981 would confirm a higher high and extend the uptrend, with tough resistance anticipated at the psychological level of 1.1000. A decisive break above 1.1000 could pave the way for further gains towards the key resistance level at 1.1139, the December 2023 high.
Market participants closely monitor price movements for decisive breaks above key levels, which could signal significant shifts in market sentiment and trading dynamics.
