EURUSD: Tariff – narrated sentiment Trade tariffs continue to be in the focus of the current market sentiment. A modest optimism was evident on the market, after the US Administration announced that for the majority of countries tariffs will be delayed for the next 90 days. China is not included in the list of countries with delayed tariffs. As for macro news posted during the previous week, some of the most important were related to the inflation figures. The inflation decreased by -0,1% in March, for the month, reaching 2,4% on a yearly basis. Core inflation was higher by 0,1% for the month and 2,8% compared to the previous year. Both figures were slightly below market estimates. The Producers Price Index in March was standing at the level of -0,4% and was below market expectations of +0,2%. Core PPI dropped by -0,1% in March also below market estimate of +0,3%. The week-end was reserved for the University of Michigan Consumer Sentiment Index. Preliminary figure for April was 50,8, which was below market expectations of 54,5. Another surprise was related to inflation expectations which were significantly higher, at the level of 6,7% for this year.
Trade balance in Germany in February reached euro 17,7B, which was in line with market estimates. Industrial Production in Germany during February dropped by -1,3% for the month, a bit higher from forecasted -1,1%. Retail Sales in the Euro Zone in February jumped by 0,3%, still lower from market consensus of 0,5%. Retail Sales on a yearly basis was standing at 2,3%. The inflation rate in Germany, final for March, was standing at 0,3% for the month and 2,2% on a yearly basis, and was fully in line with market expectations.
Regardless of developments on the US equity market, the US Dollar continued to lose strength, reaching the lowest weekly level at 1,1460 against euro at Friday's trading session. The currency pair is ending the week at the level of 1,1360. The resistance line at 1,1460 was last time tested in January 2022. The RSI clearly reached the overbought market side, at the level of 76. The MA 50 is getting quite close toward its counterpart, MA 200, indicating that the potential so-called the golden cross might occur anytime in the coming period.
After a strong move toward the upside, as occurred as of the end of the previous week, the market will use the week ahead to digest the data from the previous week. In this sense, some relaxation might be possible, but some extreme moves in favour of USD should not be expected. The market already made a retreat on Friday from 1,1460 to 1,1360. In case of a further move toward the downside there is some probability for the level of 1,11, based on current charts. However, the resistance line at $1,1460 now is missing testing, which might be the market target for one more time in the coming period. Certainly, as long as tariff-narrated sentiment is shaking the market sensitivity, a higher volatility might be expected.
Important news to watch during the week ahead are:
EUR: Wholesale prices in Germany in March, Industrial Production in the Euro zone in February, ZEW Economic Sentiment Index for the Euro zone and Germany in April, ECB Interest Rate Decision, ECB press conference,
USD: Retail Sales in March, Industrial Production in March, Fed Chair Powell speech, Building Permits preliminary for March, Housing Starts in March
