April 27 (Reuters) – EUR/USD traded below 1.10000 Thursday as U.S. weekly claims and Q1 PCE price index indicated jobs remain robust and inflation may be rising, underpinning the dollar and U.S. rates SRAU3 and leaving Friday’s potentially more decisive round of price data to determine near-term direction.
The dollar increased its yield advantage over the euro after Thursday’s data dump. German-U.S. 2-year yield spreads, which EUR/USD is correlated with, widened in the dollar’s favor.
Friday’s data is now key for EUR/USD longs.
March core PCE, the Fed’s favored pricing indicator, may determine if EUR/USD rallies through 1.1100 or if longs run for the exits.
Analysts forecast the core PCE year-on-year inflation rate will have dropped to 4.5% from 4.6%. They predict the core month-on-month rate at 0.3%, the same as the month before.
An unexpected increase for PCE would indicate rising inflation remains a problem, which could lead investors to push back expectations for Fed rate cuts.
Dollar bears may cover short positions NETUSDG10= and German-U.S. yield spreads would likely increase the dollar’s yield advantage. Both influences should pressure EUR/USD downward and put the pair’s up trend in doubt.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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