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EUR/USD has risen approximately 1% this week due to a decline in the dollar, although the euro is trailing behind other pro-cyclical currencies in the G10, excluding the US data-sensitive CAD. This isn't unexpected, as the euro has the weakest three-month correlation with two-year USD swap rates, which previously insulated it from significant upward adjustments in Fed expectations.
EURUSD H4 Chart
The 1.0900 level is unlikely to be a significant resistance point if US economic data. However, a move to the 1.1000 level appears premature given the persistent inflationary pressures in the US. We are not particularly concerned about the European Central Bank exerting significant pressure on the euro. A June rate cut is fully anticipated and almost certain at this stage, but recent eurozone data suggests that ECB President Christine Lagarde is likely to emphasize data-dependency rather than providing dovish guidance.
USA CPI
USA Inflation Rate Over YoY (May)
Today's eurozone calendar includes final April CPI figures and speeches by Luis de Guindos (presenting the ECB financial stability review), Fabio Panetta, Pablo Hernández de Cos, Mario Centeno, François Villeroy, and Joachim Nagel. It is unlikely that any policy comments will cause significant shifts in the firmly entrenched ECB pricing.
EUR Economic Calendar
Elsewhere in Europe, Norway reported a 0.2% quarter-on-quarter growth for the first quarter this morning, matching expectations. The NOK has had a strong start to the week along with its peer SEK, although the Norwegian currency appears relatively stronger due to the Riksbank's recent rate cut and the potential for further easing. We will hear from the Riksbank's Deputy Governor Martin Floden this morning, and from Governor Erik Thedeen tomorrow.
Insights Inspired by ING. Credit to Their Analysis for Shaping Some Aspects of This Text
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