The EUR/USD pair saw gains on Wednesday, reaching 1.0815. Fed’s Schmid commented on high inflation and the need for further action by the US central bank to address the issue. The Eurozone ZEW Economic Sentiment Survey also showed improvement, reaching 47.0 in May, surpassing the prior level of 43.9. In the Asian trading hours, the pair maintained a bullish bias, but caution is expected as key economic data from the Eurozone and the US is set to be released later in the day. Among the data to be watched are the first quarter Eurozone GDP and the April US Consumer Price Index (CPI).
Federal Reserve Chairman Jerome Powell highlighted that inflation is declining at a slower pace than anticipated. This, coupled with hawkish comments from other Fed officials like Jeffrey Schmid, could lead to a stronger USD and weigh on the EUR/USD pair in the short term. The upcoming US CPI data release will be crucial in influencing the Fed’s interest rate decision in the next meeting. Expectations are for a slight easing in annual headline CPI inflation to 3.4% and a drop in Core CPI inflation to 3.6% for April. If the data meets these expectations, the prospect of rate cuts may be triggered, potentially leading to a weaker Greenback and helping the EUR/USD pair. The positive Eurozone ZEW Economic Sentiment Survey has temporarily supported the pair, but all eyes are now on the European GDP growth figures, which are anticipated to show a 0.3% QoQ increase in Q1.
Overall, the EUR/USD pair is facing mixed sentiment on Wednesday, with potential influences from both US and Eurozone economic data. The cautious stance in the market ahead of the key releases indicates the impact these figures can have on the pair’s direction. In light of Fed officials’ hawkish comments, there is a possibility of the USD gaining strength, affecting the EUR/USD pair. However, if the US CPI data meets expectations and triggers the prospect of rate cuts, the Greenback may weaken, supporting the EUR/USD pair. Meanwhile, the Eurozone ZEW Economic Sentiment Survey’s positive reading has offered some initial support to the pair, but the focus is now shifting to the upcoming European GDP growth numbers for further direction. Traders are advised to closely monitor these economic indicators to navigate the potential volatility in the EUR/USD pair.
