EUR/USD snaps four days of losses and stays above 1.0500 amidst a risk-off mood

• The EUR/USD recorded losses in April of 4.75%, the biggest since 2015.
• Though Wall Street finished with substantial losses, a sudden shift in sentiment failed to boost the greenback vs. the euro.
• US Core PCE down ticked, but headline inflation rose to 6.6%, as the FOMC will hold its May monetary policy meeting

The EUR/USD recovers some ground after being battered in the week, so far down 2.30%, but the hefty monthly losses amount to 4.68%, the most relevant since January 2015. At the time of writing, the EUR/USD is trading at 1.0541.

Sentiment turned sour late in the New York session

The week finished with dismal market sentiment. US equities recorded hefty losses, between 2.77% and 4.17%. China’s coronavirus outbreak which has lasted for the last couple of weeks threatens to disrupt supply chains. The US central bank’s increasing rate hikes to tackle inflation and the Ukraine-Russia conflict, further entering its third month, were the drivers of the last trading day of the month.

Data-wise, the US economic docket featured inflationary readings for March. The Fed’s favorite measure of inflation, the Core Personal Consumer Expenditures (PCE), rose by 5.2% y/y lower than expectations, indicating that inflation excluding volatile items is peaking. The data further strengthens the case for a Federal Reserve rate hike in the next week, as the US central bank chief Jerome Powell expressed during the month that a 50-bps increase is “on the table.”

Analysts at TD Securities expressed that “we now expect the Fed to deliver three consecutive 50bp hikes (in May, June, and July) and subsequently hike rates by 25bp per meeting until they reach a terminal funds rate of 3.25% by March 2023.”

The Eurozone docket featured inflationary figures. France’s inflation rose above expectations and the previous reading, to 4.8% y/y, while French HICP reached 5.4%. Regarding the whole Eurozone, general inflation climbed to 7.5%. Additionally, GDP for Q1 rose to 5%, aligned with estimations.

Next week’s economic docket

In the week ahead, the Eurozone and US dockets would be packed. The Eurozone docket would feature a raft of Retail Sales, PMIs, Industrial Production, and Unemployment rates from Germany, Italy, Spain, France, and the block.

On the US front, the docket would reveal S%P Global PMIs, ISM PMIs, the Federal Reserve monetary policy meeting, ADP Employment Change,  and the Nonfarm Payrolls report.

Key Technical Levels