- Producer prices in Germany fell 3.3%, beating forecasts for a 3.1% drop.
- Inflation in the Eurozone fell from 2.6% to 2.4% in March.
- Markets are betting on a 65 basis point ECB rate cut this year.
EUR/USD price analysis shows solid bullish sentiment as the Euro strengthens despite weaker inflation in the Eurozone. The rise comes amid dollar weakness as investors digest recent economic data from the US.
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Data on Tuesday showed producer prices in Germany fell 3.3%, beating forecasts for a 3.1% drop. Producer inflation remained at 0.2% for the month, missing estimates of 0.3%. Inflation in the Eurozone is consistently lower. It fell from 2.6% to 2.4% in March, moving closer to the central bank’s target. As a result, investors and policymakers are more confident that the ECB will start cutting rates in June, well ahead of the Fed.
However, ECB policymakers such as Isabelle Schnabel urged caution after the June tapering. Regardless, markets are pricing in 65 basis points this year. Investors will now await Eurozone PMI reports due on Thursday for more clues on the ECB’s policy outlook.
Meanwhile, the dollar remained vulnerable after data revealed cracks in the economy last week. High borrowing costs have dampened demand and inflation, giving the Fed more reason to start cutting interest rates.
However, policymakers played down expectations of a rate cut and maintained a cautious tone. Most policymakers are not prepared to change their stance on the central bank’s policy outlook until there is more evidence of falling inflation.
EUR/USD key events today
Neither the US nor the Eurozone will release any major reports today, so the pair could trade in a range.
EUR/USD Price Technical Analysis: Bulls re-emerge above 30-SMA support
On the technical side, the EUR/USD price is climbing higher after retesting the 30-SMA support, showing that the bulls are in the lead. At the same time, the price is trading within a bullish channel, further supporting the bullish bias.
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The price recently broke above the 1.0800 resistance level, trying to break above the 1.0900 level. After that, the price entered a period of consolidation as the SMA caught up. From here, the bulls are likely ready to revisit and break above 1.0900 to make a higher high.
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