EUR/USD scales above 1.0860 ahead of Eurozone Retail Sales and US Inflation

• EUR/USD has jumped above the critical resistance of 1.0860 amid a correction in the USD Index.
• Fed Williams is anticipating inflation at 3.75% and a growth rate of less than 1% this year.
• A contraction in Eurozone Retail Sales is insufficient to back a neutral stance from the ECB.

The EUR/USD pair has climbed above the immediate resistance of 1.0860 in the early Asian session. The shared currency pair rebounded firmly after buying interest above 1.0830 in the early New York session. A corrective move in the US Dollar Index (DXY) resulted in a recovery in the Euro after a sheer sell-off.

The downside bias for the major currency pair has not been over yet as investors are anticipating a hawkish stance from the Federal Reserve (Fed) for its next month’s monetary policy.

S&P500 futures showed a stellar recovery on Monday after a gap-down opening despite anxiety among investors ahead of result season. The street is worried about the earnings of commercial banks after the banking fiasco due to the collapse of Silicon Valley Bank (SVB) and Signature Bank. Also, tight credit conditions by US banks must have impacted advances needed by firms for fixed capital working capital management.

The US Dollar Index (DXY) registered a gradual correction to near 102.54 as investors ignored China-Taiwan tensions despite the continuation of drilling by the Chinese military around Taiwan Island.

The major trigger that will keep investors busy ahead is the United States Consumer Price Index (CPI) data, which will release on Wednesday. Analysts at TD Securities expect the headline inflation to rise by 0.1% in March, and the core CPI by 0.4%. They see the CPI slowing to 3.6% by the fourth quarter.

Also, the commentary from New York Fed Bank president John C. Williams conveys, Inflation will be around 3.75% this year. He further added that the growth rate will be less than 1% and the Unemployment Rate will gradually rise to 4-4.5%. On banking turmoil, Fed Williams believes that higher rates by the Fed were not the cause of recent banking stress.

On the Eurozone front, investors are awaiting the Retail Sales data for fresh impetus. Monthly Retail Sales (March) are expected to contract by 0.8% vs. an expansion of 0.3% recorded in February. And annual Retail Sales would contract further to 3.5% from a prior contraction of 2.3%.

This might delight the European Central Bank (ECB) but is not sufficient to back a neutral stance for upcoming monetary policy meeting.