EUR/USD has climbed around 1% this week, driven by a weaker dollar. However, the euro is still lagging other pro-cyclical G10 currencies, except for the US data-sensitive CAD.
This is not surprising, given that the euro has the lowest three-month correlation with two-year USD swap rates, which previously protected it from significant upward adjustments in Fed expectations.
EURUSD H4 Chart
The 1.0900 level is not expected to pose strong resistance if US economic data, such as today’s jobless claims, puts further pressure on the dollar. Nonetheless, a rise to the 1.1000 mark seems unlikely at this point due to persistent inflation in the US. We are not particularly worried about the European Central Bank putting substantial pressure on the euro. A June rate cut is fully priced in and almost certain, but recent eurozone data indicates that ECB President Christine Lagarde will likely emphasize data-dependency over dovish guidance.
USA CPI
USA Inflation Rate Over YoY (May)
Today’s eurozone calendar features final April CPI figures and speeches from Luis de Guindos (presenting the ECB financial stability review), Fabio Panetta, Pablo Hernández de Cos, Mario Centeno, François Villeroy, and Joachim Nagel. It is improbable that policy comments will significantly alter the firmly set ECB pricing.
EUR Economic Calander
Elsewhere in Europe, Norway reported 0.2% quarter-on-quarter growth for the first quarter this morning, aligning with expectations. NOK has started the week strongly alongside its peer SEK, with the Norwegian currency appearing 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 Governor Erik Thedeen tomorrow.
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