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The euro has posted slight gains in the Monday session. Currently, EUR/USD is trading at 1.1914, up 0.13% on the day. The euro has been on a steady decline since mid-February, but reversed directions and gained 1.19% last week, its best weekly performance since mid-December. If the upward trend continues, the euro could pressure the symbolic 1.20 line as early as this week.

The eurozone has experienced another wave of Covid cases, leading to tighter lockdowns in Germany and France, the bloc’s two biggest economies. Still, there was positive news on Monday, as eurozone retail sales posted a solid gain of 3.0%, rebounding from a decline of -5.2% and easily exceeding the consensus of 1.0%. The data has given a slight lift to the euro.

US inflation, which has been at low levels for years, has been a central focus for the market over the past several months, as an improving economy has raised expectations for higher inflation. On Friday, the US released the March Producer Price Index, which measures inflation at a wholesale level.  Both the headline and core readings accelerated in March and beat the forecast. Headline inflation rose 1% MoM and 4.2% YoY  – the latter to its highest level since September 2011. Core PPI, which excludes food and energy prices, climbed 0.7% MoM and 3.1% YoY. The annual rate matched a high last seen in February 2o11.

Consumer inflation will be released on Tuesday (12:30 GMT). The releases will be closely watched, especially after the PPI data. If CPI is also stronger than expected, that could force the Federal Reserve to re-evaluate its pledge not to raise rates prior to 2024. The Fed isn’t even discussing tapering its QE programme, but rising inflation could lead the Fed to reconsider QE if it is concerned that the economy could overheat if it doesn’t take action.

EUR/USD Technical

  • There is resistance at 1.1973. Above, there is resistance at 1.2044
  • On the downside, there is support at 1.1784, followed by a support line at 1.1656
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