German and US inflation figures, eyed by EUR/USD traders

The shared currency has been bolstered by a soft US Dollar, which snapped two days of straight losses, as shown by a basket of six currencies vs. the buck. The US Dollar Index rose 0.22%, at 102.654 on Wednesday.

The US economic docket featured Pending Home Sales, which increased by 0.8% MoM in February, exceeding expectations for a 0.3% drop. Annually, it fell by 21.1%, less than the 29.4% drop predicted. On the Eurozone (EU) side, the German Gfk Consumer sentiment in April improved to -29.5 from a revised -30.6 in March. Although it improved, it was beneath the estimates of -29.0.

In the meantime, European Central Bank (ECB) policymakers have stressed the need for higher interest rates after the bank turmoil dissipated. Philip Lane, the ECB Chief Economist, said, “Under our baseline scenario, to make sure inflation comes down to 2%, more hikes will be needed.” 

Therefore, the EUR/USD pair has been upward pressured as market participants estimate that the US Federal Reserve (Fed) would leave rates unchanged at 4.75%-5.00%. After that, a few rate cuts have been priced in by the year’s end.

The EUR/USD would be influenced by inflation data in the US and the EU on Thursday and Friday. The Fed’s preferred gauge for inflation, the core PCE, will be revealed on Friday. Any upward revisions could put into play further rate increases by the US central bank. On the EU’s front, rising inflation in Germany would cement the case for another interest rate increase by the ECB.