USD Rises, Core PCE Set to Drive Market Sentiment
EUR/USD Pulls Back from Overbought, Eyes 1.0775 Support
The greenback finished the week higher against the Euro for the first time this month and it looks like uncertainty is easing, albeit just slightly. The Fed decided to keep the rate unchanged, as did the Bank of England and the Bank of Japan last week. Also, Fed Chair Powell called uncertainty “unusually elevated” and showed that the Fed is in no rush to cut the interest rate.
According to the CME FedWatch tool, the Fed will keep the rate unchanged at the next meeting, which is set to take place in May. The probability for a no-cut scenario is 85.7% and the first cut is still expected to take place in June, with a 67% probability of a 25 bps cut and a 10% probability of a 50 bps cut.
President Trump’s reciprocal tariffs will come into effect on April 2nd and it looks like discussions and speculation about them will be the main focus until that happens. In the meantime, the biggest release of this week will be the Core PCE Price Index, which is the Fed’s preferred inflation gauge and has a strong influence on where the rate is set.
Economic Calendar Highlights
Monday is PMI day, with several of these indicators released throughout the day, starting early in the morning with the French and German Flash Manufacturing and Services PMIs at 8:15 AM GMT and 8:30 AM GMT, respectively. The U.K. will release the PMIs at 9:30 AM GMT and the U.S. will end the PMI release day at 1:45 PM GMT.
Tuesday at 2:00 PM GMT we will take a look at the U.S. Consumer Confidence survey, which will probably show decreased confidence considering the latest situation surrounding the tariffs and Trump’s policy thus far.
The last major release of the week will come Friday at 12:30 PM GMT in the form of the U.S. Core PCE Price Index. The indicator tracks changes in the price paid by individual consumers for the goods and services they purchase and is one of the main gauges of inflation. The expected change is 0.3%, the same as the previous.
Technical Outlook – EUR/USD
After the second attempt to break 1.0900 resistance the Euro bulls lost their oomph and the pair started to accelerate south. Currently, EUR/USD is trading at 1.0835, getting closer to the support at 1.0775.
The RSI is moving down, coming out of overbought territory, which supports the idea of a deeper pullback. If the pair breaks below 1.0775, the move may extend towards the 50-day Exponential Moving Average. Keep in mind that the overall technical landscape is ruled by macroeconomic developments and the uncertainty surrounding the trade tariffs.
