Euro Jumps As Fed’s Powell Signals Prolonged Rates

Fundamental Analysis

* Rate Rapture: The Euro strengthened against the dollar after comments made by Fed Chair Jerome Powell. On economic data, the US Bureau of Labor Statistics reported that both monthly headline and core Producer Price Index (PPI) exceeded expectations, with a 0.5% growth compared to the anticipated 0.3% and 0.2% respectively. Annually, headline and core PPI grew as predicted, at 2.2% and 2.4% respectively. These high PPI figures might erode investors’ confidence in the Fed’s likelihood to decrease interest rates starting from the September meeting. Nevertheless, Powell described the report as having a mixed impact. He addressed concerns about interest rate adjustments, dismissing fears of a rate hike and emphasizing the intent to maintain current interest rates for an extended period to counter inflation.

Technical Analysis

* Technical Breakout: EURUSD was traded higher following recent breakout above the previous resistance level 1.0805. MACD which illustrate bullish momentum signal coupled with bullish market structure breakout suggest the pair to further extend its gains.

* Resistance and Support: If the bullish momentum persists, there’s a strong likelihood that the price will potentially head towards 1.0860. Conversely, a potential correction is also to be expected and the price could head back towards 1.07450 should the price breach below the level 1.0805.

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Potential Risks

Moving ahead, the market’s attention will be on April’s consumer inflation data for further insight. The upcoming US consumer inflation figures are anticipated to be the pivotal event of the week. In the first quarter of the year, US Consumer Price Index (CPI) remained elevated, surpassing expectations, driven by tight labor market conditions and strong household spending. As a result, investors will closely monitor these figures, as sustained high readings could prompt traders to reduce their expectations for Federal Reserve rate cuts in September. Moreover, if inflation remains elevated, it could counter the optimism surrounding potential Fed rate cuts that has been fueled by improving labor market conditions, thus influencing currency dynamics.

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Monitoring

Stay updated on US and Euro data, Fed updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.