The Euro (EUR) experienced a setback after reaching a new two-day high, driven by an uptick in inflation on the producer side in the United States (US), signaling ongoing challenges for the US Federal Reserve. The Greenback (USD) advanced as interest rate traders aligned with the Fed‘s indication of three rate cuts by 2024. At the latest update, the EUR/USD stands at 1.0759, marking a 0.08% decline.
EUR/USD Dips Amidst Escalating US Producer Price Index
The US Bureau of Labor Statistics (BLS) disclosed that the Producer Price Index (PPI) for January surpassed expectations, rising by 0.3% MoM. The core PPI also outperformed forecasts, surging to 0.5% MoM from December’s -0.1%. In year-over-year figures for January, the PPI increased by 0.9%, a decrease from December’s figures. Meanwhile, the core PPI rose by 2%, surpassing the 1.6% estimates and December’s 1.8%.
According to sources cited by Bloomberg, “Momentum has built up in inflation over the last few years and persists in many corners of the economy despite lower prices for gasoline, basic foodstuffs, and durable goods.”
The Federal Reserve closely monitors the PPI, as several categories of the report contribute to the Fed’s preferred gauge for inflation, the Personal Consumption Expenditures (PCE).
Post the release of the data, the EUR/USD pair fluctuated within the 1.0770-1.0730 range before stabilizing at current exchange rates. US Treasury bond yields climbed, and the US Dollar Index (DXY) saw a 0.22% increase at 104.50.
Additional US data revealed a 1.5% drop in Building Permits from 1.493 million to 1.47 million, while Housing Starts witnessed a significant -14.8% decline, falling from 1.562 million to 1.331 million.
In the Eurozone (EU), Germany reported Wholesale Prices for January, indicating a 0.1% MoM increase but a -2.7% drop annually compared to December’s -2.6%.
Within the central bank sphere, European Central Bank Governing Council member Isabel Schnabel emphasized caution against premature rate cuts, advocating for a sustained restrictive monetary policy. These sentiments stem from lingering concerns among ECB policymakers regarding a potential rebound in inflation.
EUR/USD Price Analysis: Technical Outlook
From a technical perspective, the EUR/USD exhibits a bearish bias despite recent recovery efforts. Buyers pushing prices toward the 100-day moving average (DMA) at 1.0796 could potentially pave the way for a challenge at 1.0800. Conversely, if sellers maintain spot prices below the psychological 1.0750 area, this might open the door to testing the February 15 low of 1.0723, followed by the 1.0700 mark.
