Eur/usd drops as economic sentiment improves in eurozone while US inflation pressures ease

EURUSD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	-0.1%	-10.7 Pips
Week to-date	-0.52%	-59 Pips
May	-1.22%	-138.3 Pips

Upcoming key events (London Time)

Thu 10:00 AM EUR GDP (seasonally adjusted) (3-mth)
Thu 01:30 PM USD PPI excluding Food and Energy sectors (12-mth)
Thu 01:30 PM USD Monthly Retail Trade (1-mth)
Thu 01:40 PM USD Federal Reserve Chair Jerome Powell speech

What happened lately

In Germany, the April 2025 Harmonized Index of Consumer Prices (HICP) and Consumer Prices remain constant compared to the previous month. The HICP stayed steady at 2.2%, indicating stable consumer prices in the eurozone’s largest economy as per Destatis. However, notable shifts occurred in economic sentiment. The Germany ZEW Indicator of Economic Sentiment experienced a significant leap in May 2025, rising to 25.2 points from a negative 14 points in April 2025, signaling an optimistic outlook for the future. Conversely, the economic situation remains criticized, with the ZEW Survey dropping to -82 points in May from -81.2 in April.

In the United States, inflation data for April 2025 reflected mixed trends. The 12-month CPI Inflation Rate decreased slightly to 2.3% from March’s 2.4%. Monthly CPI rose by 0.2%, a recovery from March’s -0.1%. The core inflation excluding food and energy sectors displayed a monthly increase of 0.2%, signifying a marginal rise contrasted with March’s 0.1%. However, the 12-month core inflation rate remained stable at 2.8%. This mixed inflation scenario suggests that while inflation pressures are present, they are not escalating rapidly.

The Euro Area showed signs of recovery, with the ZEW Survey for Economic Sentiment significantly improving in May 2025 to 11.6 points from April’s negative 18.5. This boost in sentiment suggests an increasing optimism about economic conditions in the eurozone, potentially bolstering investor confidence.

Regarding EURUSD, the pair’s current consolidation phase signified by a -0.1% drop to 1.11749 indicates much indecision despite the drop in the U.S. inflation rate and the rise in eurozone economic sentiment. Looking forward, key events such as the release of the EUR GDP data and significant U.S. economic indicators, including the PPI, retail trade data, and Chair Jerome Powell’s speech, could lead to more significant movements. The data release could either provide more clarity or further consolidation depending on how they align with market expectations. Unexpected GDP growth in the eurozone or dovish comments from Fed Chair Powell could strengthen the EUR against the USD, whereas robust U.S. economic data could bolster the USD, potentially driving EURUSD lower.

Latest from X (Twitter)

Tweets by Eurostat

What can we expect from EURUSD today?

EURUSD on Wednesday dropped -0.1% to 1.11749. Price is below 9-Day EMA while Stochastic is rising.

Updated daily direction for EURUSD looks mixed as the pair is likely to consolidate above 1.11375 (S1).

Looking ahead today, to see upside interest, we prefer to look at price breakout of last daily high of 1.12658 or trades above daily pivot 1.12017. Break above could target R1 at 1.1239. While to the downside, we are looking at 1.11375 (S1) and daily low of 1.11643 as support levels. EURUSD need to break on either side to indicate a short-term bias. A close below 1.11643 would indicate selling pressure.

For the week to-date, take note that EURUSD is bearish as the pair posted lower by -0.52%.

Key levels to watch out:

#EURUSD Trending on Twitter

[custom-twitter-feeds hashtag=”#EURUSD” num=3 showheader=false]