EUR/USD stays defensive above 1.1000 as Eurozone GDP, Fed’s favorite inflation loom

• EUR/USD struggles to defend late Thursday’s corrective bounce after a volatile day.
• US Real GDP came in softer but details bolstered hawkish Fed concerns and allowed US Dollar to initially rise.
• Risk catalysts, key growth and inflation data can offer another active day ahead of next week’s ECB, Fed meeting.

EUR/USD seesaws around 1.1030 after a whippy day that initially convinced bears before paring some of the losses during the American session. While the US data could be held responsible for Thursday’s volatility, the Euro pair’s latest inaction is logical ahead of the Eurozone Gross Domestic Product (GDP) for the first quarter (Q1), as well as the US Core Personal Consumption Expenditure (PCE) Price Index details for March.

On Thursday, the first readings of the US Gross Domestic Product (GDP) for the first quarter (Q1) of 2023, also known as Advance readings, marked mixed outcomes. That said, the headline US GDP Annualized eased to 1.1% from 2.0% expected and 2.6% prior but the GDP Price Index inched higher to 4.0% on an annualized basis from 3.9% prior and 3.8% market consensus. Further, the Personal Consumption Expenditure (PCE) Prices for Q1 rallied to 4.2% from 3.7% in previous readouts whereas the Core PCE figures also crossed 4.8% market forecasts and 4.4% prior with 4.9% mark for the said period.

With this, a stronger-than-expected increase in the inflation component of the GDP renewed hawkish concerns about the Federal Reserve (Fed) and helped the US Dollar to pick up bids after the release. However, the downbeat prints of headline GDP allowed markets to turn optimistic and favored the EUR/USD pair buyers.

It’s worth noting that the banking fallout risks also prod the Euro bulls previously while the mixed EU data defended the buyers. That said, US banking fallout fears regain momentum amid reports that the First Republic Bank (FRB) plans to sell half its loan book to fill a $100B deposit flight gap. That said, Eurozone Consumer Confidence improved for April but Business Climate eased for the said month.

Amid these plays, Wall Street closed positive and yields rose but the US Dollar retreated during the later part of the day and ended Thursday with mild gains.

Looking forward, the first readings of the Q1 GDP growth figures from the old continent will be crucial to watch ahead of the US Core PCE Price Index for March, the Fed’s preferred inflation gauge. These figures are likely to print softer data but any positive surprise will be helpful to determine the next week’s monetary policy decision from the European Central Bank (ECB) and the Federal Reserve (Fed) monetary policy meeting

Also read: US Core PCE Preview: Why this is a lose-lose situation for the US Dollar

Technical analysis

EUR/USD buyers appear to run out of steam as they battle with an upward-sloping resistance line from early February, close to 1.1075 by the press time.