EUR/USD – Euro Steady as Euro Consumer Inflation Matches Forecast

EUR/USD has posted slight gains on Friday, as the pair trades at 1.1150. On the release front, Friday is data-heavy, so we can expect some movement from EUR/USD, especially in the North American session. Eurozone Final CPI posted a small gain of 0.1%, while Core Final CPI climbed 0.9%, as both readings matched the forecast. In the US, we’ll get a look at CPI and Retail Sales reports, as well as the UoM Consumer Sentiment Index. Consumer numbers are critical for economic growth, so the markets will be following the US releases closely. Any unexpected readings could have a strong impact on the movement of EUR/USD.

There were no surprises from the Eurozone inflation data on Friday. Final CPI was up 0.1% in June. This isn’t much to cheer about, but any gains are welcome, as this was only the second reading in positive territory in 2016. Final Core CPI, which excludes items such as food and alcohol, showed a respectable gain of 0.9%. German inflation numbers dipped in June, although they managed to meet market expectations. German Final CPI gained just 0.1%, down from 0.3% in the previous release. German WPI climbed 0.6%, compared to 0.9% in the May report. With inflation mired at low levels, the ECB is under pressure to adopt further monetary easing, but even this may not be enough to kick-start a languishing economy. Japan has not been shy about lowering interest rates into negative territory, but this has not translated into higher inflation levels.

US numbers looked sharp on Thursday. Inflation showed some strength, as PPI climbed 0.5 percent, ahead of the estimate of 0.3 percent. This marked the highest monthly gain since May 2015. Core PPI followed suit with a gain of 0.4 percent, beating the forecast of 0.1 percent. On the employment front, Unemployment Claims remained at 254 thousand, below the estimate of 263 thousand. Is US inflation on the move? We’ll get a look at CPI numbers later on Friday, and a solid release could boost the US dollar.

Across the Channel, financial and political developments are unfolding in Britain on an almost daily basis. On Thursday, the BoE surprised the markets by staying put and not lowering interest rates. The markets had widely expected a quarter point cut from the BoE, which would have marked the first rate cut since July 2009. BoE Mark Carney had  strongly hinted at the move when he recently stated that economic conditions had deteriorated and the BoE would need to lower rates in the summer, but Carney has evidently decided to wait. On the political front in Britain, Theresa May replaced David Cameron as Prime Minister on Wednesday. May was a strong supporter of the Remain camp, but she will now be mandated with presiding over Britain’s exit from the European Union. May has stated that the government fully intends to honor the referendum vote, stating emphatically this week that “Brexit means Brexit”. However, Britain’s exit could be a protracted and messy affair, especially as May has named Boris Johnson, leader of the “Leave” camp, as foreign minister. Johnson and EU leaders do not enjoy a good relationship, but all will have to behave and get to tricky matter at hand – commencing negotiations over Britain’s departure and establishing a new trade relationship between the EU and its island neighbor.

EUR/USD Fundamentals

Friday (July 15)

• 8:00 Italian Trade Balance. Estimate 3.27B. Actual 5.03B
• 9:00 Eurozone Final CPI. Estimate 0.1%
• 9:00 Eurozone Final Core CPI. Estimate 0.9%
• 9:00 Eurozone Trade Balance. Estimate 0.2%
• 12:30 US CPI. Estimate 0.2%
• 12:30 US Core CPI. Estimate 0.2%
• 12:30 US Retail Sales. Estimate 0.4%
• 12:30 US Core Retail Sales. Estimate 0.1%
• 12:30 US Empire State Manufacturing Index. Estimate 5.1 
• 13:15 US Capacity Utilization Rate. Estimate 75.2%
• 13:15 US Industrial Production. Estimate 0.2%
• 14:00 US Preliminary UoM Consumer Sentiment. Estimate 93.7 
• 14:00 US Business Inventories. Estimate 0.1%
• 14:00 US Preliminary UoM Inflation Expectations

* Key releases are in bold

*All release times are GMT

EUR/USD for Friday, July 15, 2016

EUR/USD July 15 at 12:20 GMT

Open: 1.1106 High: 1.1149 Low: 1.1104 Close: 1.1132

EUR/USD Technical

• EUR/USD has posted small gains in the Asian and European sessions
• 1.1054 is providing support
• There is resistance at 1.1150

Further levels in both directions:

• Below: 1.1054, 1.0925 and 1.0821
• Above: 1.1150, 1.1278, 1.1376 and 1.1495
• Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement on Friday. Short positions have a strong majority (60%), indicative of strong trader bias towards EUR/USD reversing directions and moving to lower levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.