EUR/USD overbought
|Last week's first quarter GDP (+0.4%) and April inflation (2.2%) data out of the Euro Area both surprised to the upside last week, muddying the waters a bit on the narrative that the deflationary impact of the tariffs clears the way for significant further ECB cuts.
The terminal rate is priced by markets at 1.5%, which implicitly assumes significant further falls in core inflation from its levels currently not far from 3%. Yet, with Eurozone unemployment steady at historical lows, services inflation stubbornly high and the prospect for massive German fiscal stimulus this may be difficult to achieve.
The rest of the week looks set to be relatively quiet in the Euro Area, aside from the admittedly dated retail sales print for March on Wednesday morning.
We continue to view EUR/USD as slightly overbought in the near-term, although any pullback will be very much dependent on US factors, namely the market’s view towards the tariffs.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.