The euro is calm on Wednesday. In the North American session, EUR/USD is trading at 1.1334, down 0.45% on the day.
Germany's inflation rate dropped to 2.1% y/y in April, down from 2.2% in March but above the market estimate of 2.0%. This was the lowest level in seven months, largely driven by lower energy prices.
The more significant story was that core CPI, which excludes energy and food and is a more reliable indicator of inflation trends, rose to 2.9% from 2.6%. This will be of concern to policymakers at the European Central Bank, as will the increase in services inflation. The ECB has to balance the new environment of US tariffs and counter-tariffs against the US, which will raise inflation, along with the strong rise in the euro and fiscal stimulus which will boost upward inflationary pressures.
The ECB will be keeping a close look at Friday's eurozone inflation report, which is expected to follow the German numbers. Headline CPI is projected to drop to 2.1% from 2.2%, while the core rate is expected to rise to 2.5% from 2.4%. The central bank would prefer to continue delivering gradual rate cuts in order to boost anemic growth, but this will be contingent on inflation remaining contained.
The markets were braced for soft US numbers but the data was worse than expected. ADP employment change declined to 62 thousand, down from a revised 147 thousand and below the market estimate of 115 thousand.
This was followed by first-estimate GDP for Q1, which declined by 0.3% q/q, down sharply from 2.4% in Q4 and lower than the market estimate of 0.3%. This marked the first quarterly decline in the economy since Q1 2022. The weak GDP reading was driven by a surge in imports ahead of US tariffs taking effect and a drop in consumer spending.
EUR/USD has pushed below support at 1.1362 and is testing support at 1.1338. Below, there is support at 1.1306
There is resistance at 1.1394 and 1.1418
Germany's inflation rate dropped to 2.1% y/y in April, down from 2.2% in March but above the market estimate of 2.0%. This was the lowest level in seven months, largely driven by lower energy prices.
The more significant story was that core CPI, which excludes energy and food and is a more reliable indicator of inflation trends, rose to 2.9% from 2.6%. This will be of concern to policymakers at the European Central Bank, as will the increase in services inflation. The ECB has to balance the new environment of US tariffs and counter-tariffs against the US, which will raise inflation, along with the strong rise in the euro and fiscal stimulus which will boost upward inflationary pressures.
The ECB will be keeping a close look at Friday's eurozone inflation report, which is expected to follow the German numbers. Headline CPI is projected to drop to 2.1% from 2.2%, while the core rate is expected to rise to 2.5% from 2.4%. The central bank would prefer to continue delivering gradual rate cuts in order to boost anemic growth, but this will be contingent on inflation remaining contained.
The markets were braced for soft US numbers but the data was worse than expected. ADP employment change declined to 62 thousand, down from a revised 147 thousand and below the market estimate of 115 thousand.
This was followed by first-estimate GDP for Q1, which declined by 0.3% q/q, down sharply from 2.4% in Q4 and lower than the market estimate of 0.3%. This marked the first quarterly decline in the economy since Q1 2022. The weak GDP reading was driven by a surge in imports ahead of US tariffs taking effect and a drop in consumer spending.
EUR/USD has pushed below support at 1.1362 and is testing support at 1.1338. Below, there is support at 1.1306
There is resistance at 1.1394 and 1.1418
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.