EZ CPI Beats Forecasts

The latest set of eurozone inflation data today told a familiar tale. The flash eurozone CPI estimate for February came in at (headline) 2.6% vs 2.5% expected with core also seen at 3.1%, above the 2.9% the market was looking for. As we’ve seen in the US and UK recently, a slight uptick in inflation is creating some near-term uncertainty with rate projections. While the ECB is forecast to cut rates this year, traders are still struggling with nailing down the expected timing of the first rate cut. The ECB continues to push back against near-term rate-cut calls, warning that rates must stay at elevated levels for longer in order to bring inflation down.

June Cut in Focus

Currently, market pricing for a rate cut is centered around June with traders keen to see if the ECB strengthens this view next week or pushed back further. Recent ECB commentary has continued to tow the line of needing to keep rates at current levels as long as necessary. Given this latest data, next week’s meeting is likely to hear the bank striking a similar tone. In terms of market reaction in EUR this will likely depend on whether next week’s meeting causes any shift in market pricing fo the June meeting.

Technical Views

EURUSD

The recent test of the 1.0724 level has seen the market turning higher again with price remaining in the bull channel for now. While the channel and 1.0724 hold, the focus is on a further push higher with 1.0937 the next hurdle for bulls. To the downside, should we break lower, 1.0515 become the next bear target.