EUR/USD climbs to 2-day high around 1.0580, looks to EMU CPI, GDP

• EUR/USD regains the smile and targets 1.0600.
• EMU flash April CPI next of note on Friday.
• US inflation tracked by the PCE comes next in the dockewt.

Finally, some light at the end of the tunnel for the European currency, as EUR/USD regains some upside traction and manages to break above the 1.0500 mark on Friday.

EUR/USD focuses on EMU, US inflation data

After six consecutive day pullbacks, EUR/USD rebounds with some conviction and now approaches the key barrier at 1.0600 the figure amidst the corrective decline in the greenback and the mixed performance in yields.

On the latter, US yields advance modestly and remain close to weekly highs, while German 10y bund yields fade part of Thursday’s decent advance.

In the domestic calendar, flash GDP Growth Rate in Germany showed the economy is expected to expand 3.7% YoY and 0.2% inter-quarter. Later in the European morning, advanced inflation and GDP figures in the broader Euroland will be in the limelight.

Across the pond, all the attention is predicted to be on the inflation figures gauged by the PCE and Core PCE along with Personal Income/Spending and the final U-Mich Index.

What to look for around EUR

EUR/USD leaves behind part of the recent multi-session sharp selloff and rebounds from 5-year lows around 1.0470 (April 28). The outlook for the pair still remains tilted towards the bearish side, always in response to dollar dynamics, geopolitical concerns and the Fed-ECB divergence. Occasional pockets of strength in the single currency, in the meantime, should appear reinforced by speculation the ECB could raise rates at some point around June/July, while higher German yields, elevated inflation and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.

Key events in the euro area this week: Germany, EMU Flash Q1 GDP Growth Rate, EMU Flash Inflation Rate (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Second round of the presidential elections in France (April 24). Impact on the region’s economic growth prospects of the war in Ukraine.

EUR/USD levels to watch

So far, spot is up 0.72% at 1.0574 and faces the next hurdle at 1.0936 (weekly high April 21) seconded by 1.1000 (round level) and finally 1.1142 (100-day SMA). On the other hand, a break below 1.0470 (2022 low April 28) would target 1.0453 (low January 11 2017) en route to 1.0340 (2017 low January 3 2017).