EUR/USD defends 1.0900 ahead of Eurozone Inflation and German Retail Sales

• EUR/USD has defended the 1.0900 support as investors see more rate hikes from the ECB.
• Solid wage growth and labor shortage led to a jump in monthly German inflation.
• S&P500 futures continued their upside journey on Thursday as investors’ confidence has been restored.

The EUR/USD pair has shown decent buying interest after a gradual correction to near the round-level support of 1.0900 in the late New York session. The major currency pair has resumed its upside journey as investors are anticipating more rate hikes from the European Central Bank (ECB) as German inflation remained higher than expected.

In Germany, prices of goods and services in March have accelerated by 1.1%, higher than the consensus of 0.8% and the former release of 1.0%. Annual German Harmonized Index of Consumer Prices (HICP) landed at 7.8%, significantly lower than the prior release of 9.3% but higher than the estimates of 7.5%. Annual HICP figures have softened firmly led by lower energy prices, however, prices of core products look solid amid the shortage of labor.

The labor market has grabbed the bargaining power due to a shortage of job seekers and wage growth is now at between 5% and 6%, the highest in decades, as reported by Reuters. This has bolstered the case for more rate hikes from ECB President Christine Lagarde.

On Friday, the release of Eurozone HICP and German Retail Sales data will provide more clarity. Annual preliminary Eurozone HICP is expected to decelerate to 7.1% vs. the prior print of 8.5%. Along with them, monthly German Retail Sales are expected to expand by 0.5% against a contraction of 0.3%.

Meanwhile, the upside bias for the shared currency pair is also backed by the declining US Dollar Index (DXY). The USD Index is juggling after a fresh weekly low at 102.07. The USD Index failed to capitalize on the anticipation of one more rate hike this year by Federal Reserve (Fed) chair Jerome Powell in a private meeting with United States lawmakers.

S&P500 futures continued their upside journey on Thursday as investors’ confidence has been restored after easing US banking jitters, portraying a higher risk appetite of the market participants.