European markets are set to resume trading today after the Easter holiday, with the spotlight on Germany’s Consumer Price Index (CPI) preliminary report. There’s a consensus that the next move by the ECB could be a rate cut, with even hawkish members suggesting a consideration for a rate cut in June if the data supports it.
The March CPI preliminary report from Germany, set to be released today, will serve as one piece of evidence for this. The year-on-year forecast is expected to slow to +2.2% from the previous +2.5%. The Harmonized Index of Consumer Prices (HICP) is also expected to show a deceleration in growth to +2.4% from +2.7% previously. The reaction of the Euro exchange rate to any deviation from market consensus is anticipated.
Recently, the Euro/Dollar rate has been declining. After being resisted just before 1.10 on March 8, it has been on a downward trend. Currently, it’s in the early 1.07 range, showing momentum to break below the significant level again. Yesterday’s strong ISM Index put upward pressure on the dollar, but today’s German CPI will reveal whether there’s additional pressure from the Euro side. A weaker figure could potentially lead to a breach below the 1.07 level.
Other economic indicators to be released in the overseas market include the German CPI, JOLTS job openings, U.S. factory orders for February, and the final figures for U.S. durable goods orders for February.
As we move into NY trading hours, scheduled speeches from U.S. financial officials will be in focus, including remarks from FRB Governor Bowman, NY Fed President Williams, Cleveland Fed President Mester, and San Francisco Fed President Daly. With the market leaning towards fewer rate cuts or a delayed start by the FOMC, given stronger-than-expected U.S. economic data, it’s crucial to watch whether these speeches will temper or fuel market speculations.
With the Euro being heavily sold, the German Consumer Price Index (CPI) is critical. A higher-than-expected figure could trigger strong buying back into the heavily sold Euro.
