EUR/USD: Euro-zone’s annual inflation accelerated to a more than 12-month high in May


EURUSD Movement

For the 24 hours to 23:00 GMT, the EUR rose 0.33% against the USD and closed at 1.1702, helped by receding worries over Italy’s political turmoil and a surge in the Euro-zone’s annual inflation.

Data showed that the Euro-zone’s flash consumer price index (CPI) climbed more-than-expected by 1.9% on an annual basis in May, jumping by the most since April 2017 and spurring calls for an end to the European Central Bank’s (ECB) extraordinary stimulus. In the prior month, the CPI had risen eased 1.2%. Additionally, the region’s unemployment rate surprisingly remained steady at 8.5% in April, defying market consensus for a fall to 8.4%. Unemployment rate had registered a revised reading of 8.6% in the prior month.

The US Dollar declined against a basket of major currencies, amid renewed concerns over global trade war after the US President, Donald Trump announced plans to impose tariffs on steel and aluminium imports from close traders.

On the data front, initial jobless claims in the US dropped more-than-expected to a level of 221.0K in the week ended 26 May, compared to market expectations for a drop to a level of 228.0K. Initial jobless claims had registered a level of 234.0K in the prior week. Also, the nation’s Chicago Fed purchasing managers’ index jumped to a level of 62.7 in May, exceeding market consensus for a rise to a level of 58.3. The index had registered a level of 57.6 in the prior month.

In other economic news, personal income in the US rose 0.3% on a monthly basis in May, in line with the market expectations and following a gain of 0.2% in the previous month. Moreover, the nation’s personal spending grew 0.6% on a monthly basis in April, rising by the most in 5 months. Market participants had anticipated personal spending to increase 0.4%, after recording a revised reading of 0.5% in the previous month.

However, the nation’s pending home sales unexpectedly slumped 1.3% in April, suggesting that housing market has started cooling further. Pending home sales recorded a revised increase of 0.6% in the preceding month, while investors had envisaged for a rise of 0.4%.

In the Asian session, at GMT0300, the pair is trading at 1.1684, with the EUR trading 0.15% lower against the USD from yesterday’s close.

The pair is expected to find support at 1.1642, and a fall through could take it to the next support level of 1.1600. The pair is expected to find its first resistance at 1.1725, and a rise through could take it to the next resistance level of 1.1766.

Going ahead, investors would await the final Markit manufacturing PMI for May, scheduled to release across the Euro-zone in few hours. Furthermore, the US non-farm payrolls and average hourly earnings data, both for May, slated to release later in the day, will keep investors on their toes.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

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