Nov 15 (Reuters) – EUR/USD fell Wednesday as U.S. yields US2YT=RR rallied on above estimate October retail sales and upward revisions to September sales data but downward trend in inflation may trump the influence of apparently resilient consumers.
Headline October PPI came in below estimates with month-on-month PPI falling to -0.5% from September’s downwardly revised +0.4%. Year-on-year PPI dropped to +1.3% from the prior +2.2%.
The downside surprises followed October CPI’s downside miss and reinforces the trend of disinflation.
Both year-on-year CPI and PPI have been trending lower since peaking in June 2022. The down trends have been intense and indicate reaching the Fed’s 2.0% inflation target may come sooner than expected.
Should the down trends intensify, investors may lean towards the Fed cutting rates sooner than expected. In that scenario, the dollar would follow U.S. yields lower and EUR/USD would rally.
Technicals suggest pull backs could be an opportunity for bulls as well.
EUR/USD traded above the daily cloud top and 200-DMA as well as the 1.0750/70 zone, which had been solid resistance. The rally following October’s monthly doji candle and rising monthly RSI reinforce bullish signs.
EUR/USD likely has to consolidate its recent sharp gains before the rally resumes.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
