Published on 14.02.2023 12:18

The Euro is stuck in a tight trading range against the US dollar as we enter today’s trading session as market participants sit on the sidelines while awaiting the latest consumer price index figures from the US which will likely dictate the direction of the EUR/USD currency pair this week.

U.S. inflation likely slowed again last month in the latest sign that consumer price increases are becoming less of a burden on America's households. But Tuesday's report from the government may also suggest that further progress in taming inflation could be slow and “bumpy,” as Federal Reserve Chair Jerome Powell has described it.

Consumer prices are expected to have risen 6.2% in January from 12 months earlier, down from a 6.5% year-over-year surge in December. It would amount to the seventh straight slowdown.

On a monthly basis, though, inflation is expected to have jumped 0.5% from December to January, according to a survey of economists by the data provider FactSet. That would be much faster than the 0.1% uptick from November to December.

If the forecasts prove to be correct the Euro is likely to remain relatively unchanged against the greenback but should the numbers come in above expectations the European currency may face serious losses as the market positions itself for bigger rate hikes from the US Federal Reserve.

There was some good news for the European economy yesterday as the European Commission raised its growth forecast for the eurozone this year and also expects inflation to be lower than previously estimated at the end of 2022. The expected GDP for the eurozone was raised by 0.9 per cent which was up from the previously predicted 0.3 per cent.

Additionally, the eurozone might also dodge recession this year and the wider European Union is expected to grow by 0.8 per cent from the previously predicted 0.3 per cent, said the EC.

“Almost one year after Russia launched its war of aggression against Ukraine, the EU economy is on a better footing than expected in autumn”, said the commission yesterday.

“Inflation appears to have peaked and favourable developments in energy markets foreshadow further forceful declines.” They added.

Looking further ahead today, no major movement in the EUR/USD currency pair is expected until the inflation figures from the US hit the market and even the release of GDP figures from the Eurozone which will come out slightly earlier are not expected to create much volatility.


FAQ