EUR/USD Rises to 1.12 Despite Cooler German Inflation
- German CPI eases to 2.2%
- US CPI cooled by more than expected to 2.3%
- EUR/USD tests 1.12 resistance but could
EUR/USD has recovered to 1.12 levels following USD weakness in light of cooler than expected US inflation data and as German inflation failed to spark a reaction.
German inflation was 2.2% in April, confirming the preliminary data and marking the lowest level since October 2024. The data support the view that the ECB will likely cut rates again in the June meeting. Dovish ECB expectations could limit the recovery in the EUR from here.
The US Dollar fell yesterday and is holding those losses today after weaker-than-expected inflation data. CPI cooled to 2.3% YoY, easing fears over the inflationary impact of tariffs on the economy, adding to Fed rate cut expectations.
The Fed left rates unchanged and is in no rush to raise rates until there is more clarity over the impact of the tariffs on hard data.
On the other hand, the USD is finding some support from news surrounding the US-China trade truce. After negotiations in Geneva, the US and China agreed to reduce tariffs on each other. The US lowered tariffs on China to 30% from 145%, while China cut tariffs on US imports to 10% from 125%.
Attention is turning to Federal Reserve Chair Jerome Powell’s speech tomorrow and US retail sales for the next catalyst.
EUR/USD Forecast - Technical Analysis
EUR/USD has fallen from its multi-year high of 1.1575 to a low of 1.1065, finding support on the 50 SMA. The price has rebounded and is testing resistance at 1.12. The RSI is neutral at 50, so momentum could be lacking to push much higher.
Buyers would need to rise above 1.12 to open the door to 1.1275, after which 1.14 comes into play.
On the downside, sellers will need to take out the 50 SMA support at 1.1060 to create a lower low. Below here, 1.10 comes into focus.
FTSE 100 Holds Steady Amid Mixed Earnings
- Sentiment in limbo awaiting tariffs impact on data
- Imperial Brands fall, Burberry jumps
- FTSE trades in a holding pattern
The FTSE and its European peers are little changed on Wednesday amid mixed corporate results, and AS market sentiment awaits its next catalyst.
Optimism surrounding trade deals and de-escalating the US-China trade war has boosted stocks, aiding the recovery from their 2025 low. However, the upside from here could be limited as investors await hard data to assess the impact of Trump’s trade tariffs on the economy.
Yesterday’s cooler-than-expected US inflation eased concerns over the inflationary impact of trade tariffs. However, hard data could deteriorate over the coming months as the impact starts to show through.
In the UK, earnings were in focus, with big names such as Imperial Brands dragging on the index. Imperial Brands plunged 7% after weeks of expected first-half profits and after announcing the departure of its CEO.
On the upside, Burberry shares jumped almost 10% after signs of stabilisation in sales and as the firm reiterated its earnings forecast, defying a deteriorating outlook across the luxury sector.
The UK economic calendar is quiet today. Yesterday’s figures showed a mixed labour market, with unemployment rising to its highest level since 2021 but wage growth remaining sticky.
Looking ahead, OPEC’s monthly market report is due later today and could influence crude prices and, therefore, oil majors on the FTSE.
FTSE 100 Forecast - Technical Analysis
The FTSE recovered from the 7535 low to a peak of 8690 and is now consolidating around 8600. The RSI is flat but holding above 50.
Buyers will need to break out of range by moving above 8650 to bring 8700 into target.
Sellers would need to break out of range below 8525 to create a lower low and expose the 200 SMA at 8360.