EUR jumps as Germany’s HICP rate accelerates

The USD tended to edge a bit lower against its counterparts yesterday, yet the overall sideways movement seems to be maintained. On a fundamental level, we note that the market worries about the Feds’ hawkish intentions seem to remain ever-present and we note that Fed policymakers maintained their hawkish tone yesterday. It’s characteristic that Minneapolis Fed President Kashkari and Atlanta Fed President Bostic called for more aggressive interest rate hikes in order to curb inflationary pressures in the US economy. On a macroeconomic level, we note that the ISM manufacturing PMI figure improved for the month of February, yet rose less than expected, remaining below the reading of 50 and implying a continuous four-month contraction of economic activity for the US manufacturing sector. US stock markets ended the day with mixed results as Dow Jones edged higher, yet the tech-sensitive Nasdaq was in the reds, as investors are navigating through the Fed’s intentions and the earnings releases. Gold’s price was on the rise for a third day in a row benefiting from USD’s weakening and we expect the negative correlation between the two instruments to remain on display once again today.

EUR jumped yesterday and we highlight the acceleration of Germany’s preliminary HICP rates for February on a year-on-year level and note that also Spain’s and France’s respective indicators had a similar behaviour in a clear sign that inflationary pressures in the Eurozone are still strong. The acceleration could harden ECB’s aggressive, hawkish approach further, and its characteristic that before the release, Germany’s BuBa president Nagel warned about more substantial rate hikes after the March meeting. Given the acceleration of Germany’s, France’s and Spain’s preliminary HICP rates for the past month on a yearly level, we would not be surprised to see also Eurozone’s (as a whole) HICP rates accelerating somewhat, providing a bullish surprise for EUR traders today, despite the consensus of a possible slow down of the rate. Across the world, we note the steep drop of Australia’s building approvals growth rate for January which may intensify given RBAs’ hawkish intentions for further rate hikes.

EUR/USD rose trying to reach the 1.0715 (R1) resistance line yesterday, yet corrected lower during today’s Asian session. We highlight that the pair in its upward movement broke the upper boundary of the downward channel guiding it, thus we switch our bearish outlook in favour of a sideways motion bias for the time being. Should the pair find fresh buying orders along its path we may see EUR/USD breaking the 1.0715 (R1) resistance line and aim for the 1.0815 (R2) resistance level. Should a selling interest be expressed by the market for the pair, we may see EUR/USD breaking the 1.0575 (S1) support line and aim for the 1.0430 (S2) support level.

GBP/USD edged lower yesterday aiming for the 1.1925 (S1) support line. Overall though the sideways motion between the 1.2115 (R1) and the 1.1925 (S1) seems to be maintained for now. Should the bears take over, we may see cable breaking the 1.1925 (S1) support line and aim for the 1.1740 (S2) level. Should the bulls be in charge we may see cable breaking the 1.2115 (R1) resistance line and aim for the 1.2270 (R2) level.

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During today’s European session, we note the release of Eurozone’s preliminary HICP rate for February and weekly Turkey’s FX reserves, while on the monetary front ECB board member Schnabel is scheduled to speak. In the American session, we note the release of the US weekly initial jobless claims figure while BoE Chief economist Pill, RBNZ Governor Andrian Orr and Fed Board Governor Waller are scheduled to speak. During tomorrow’s Asian session, we note the release of Australia’s and China’s services PMI figures for February, while from Japan we get Tokyo’s CPI rates for the same month and on the monetary front, Minneapolis Fed President Kashkari speaks.