EUR/USD is pointing lower for a third straight day. Currently the pair is trading at 1.1156, down 0.15% on the day. On the release front, eurozone CPI Flash Estimate improved to 1.7% in April, up from 1.4% a month earlier. The core release climbed to 1.2%, compared to 0.8% in March. Both indicators beat their estimates. In the U.S., the focus is on employment numbers. Nonfarm payrolls is expected to slow to 181 thousand. Will we see a repeat performance of the ADP release, which also was expected in at 181 thousand but soared to 275 thousand? Wage growth is expected to climb to 0.3% in April, after a negligible gain of 0.1% a month earlier.
Eurozone inflation is expected to climb to 1.7% in April, marking a 5-month high. The stronger reading is a reflection of higher oil prices, which has pushed prices higher. Inflation is moving closer to the ECB target of close to 2 percent, and if the upward trend continues, ECB rate-setters will have to give some thought to raising interest rate levels. The bank recently announced that no rate hikes were planned before the spring of 2020, and this dovish stance makes the euro less attractive to investors.
The Federal Reserve maintained the benchmark rate, as expected. The rate statement noted that inflation pressures are muted and that the FOMC would remain patient regarding future rate movements. Jerome Powell reinforced this stance at a follow-up press conference, saying “we don’t see a strong case for moving in either direction”. The Fed is already on record as saying it does not expect to raise rates before 2020, and with inflation levels persistently below the Fed’s target of 2.0%, the Fed can afford to continue its wait-and-see stance.
