EUR/USD crosses 1.0860 ahead of EU retail sales, American inflation

The Dollar Index has corrected, and the EUR/USD pair has surged above the key resistance level of 1.0860. This year, Fed Williams projects inflation to be 3.75% and growth to be less than 1%.

A decline in retail sales across the Eurozone is inadequate to support the ECB’s neutral stance. In the early Asian session, the EUR/USD pair has surpassed the immediate resistance level of 1.0860. At the time of writing, the price of the pair is 1.0864.

After strong buying demand above 1.0830 in the early New York session, the common currency pair recovered significantly. After a sharp sell-off, the Euro recovered as a result of a corrective move in the US Dollar Index (DXY).

Investors are expecting the Federal Reserve (Fed) to take a hawkish posture when it announces its monetary policy for the next month, therefore the major currency pair’s downward bias is still present.

Notwithstanding investor trepidation ahead of results season, S&P500 futures displayed a remarkable comeback on Monday following a gap-down opening. Since the financial crisis caused by the failure of Silicon Valley Bank and Signature Bank, the public is concerned about the profits of commercial banks.

Also, the US banks’ strict credit policies must have affected the advances that businesses needed for fixed capital working capital management.

The US Dollar Index registered a gradual correction to near 102.54 as investors ignored China-Taiwan tensions despite the continuation of drilling by the Chinese military around Taiwan Island.

The release of the Wednesday’s Consumer Price Index (CPI) data for the United States is the main event that will keep investors busy in the coming weeks. TD Securities analysts forecast a 0.1% increase in March’s headline inflation and a 0.4% increase in the core CPI. By the fourth quarter, they predict that the CPI will have slowed to 3.6%.

Also, according to John C. Williams, president of the New York Fed Bank, inflation will be around 3.75% this year. He continued by saying that the unemployment rate would progressively increase to 4–4.5% and that growth would be less than 1%. According to Fed Williams, the recent banking stress was not brought on by the Fed’s increasing interest rates.

Investors are looking for new energy in the Eurozone and are waiting for the Retail Sales report. A 0.8% decline in monthly retail sales is anticipated for March, compared to a 0.3% increase in February. Moreover, the annual decline in retail sales would increase to 3.5% from a previous decline of 2.3%.

Although the European Central Bank may be pleased, this does not support a neutral posture for the next monetary policy meeting.