The euro is almost unchanged in the Wednesday session. In North American trade, EUR/USD is trading at 1.1940, down 0.01% on the day.
An important gauge of economic activity is the PMI reports, and the news was positive out of Germany and the eurozone. German PMIs improved in May, as services and manufacturing continue to show strong expansion. Manufacturing PMI rose from 64.0 to 64.9, and the Services PMI climbed from 52.8 to 58.1. Eurozone PMIs posted similar numbers, signalling that the eurozone recovery continues to deepen, as the vaccine rollout moves ahead at a brisk clip.
Later today, we’ll get a look at US Manufacturing and Services PMI, with estimates of 61.5 and 70.0, respectively. A reading above the 50-level points to expansion, so if the consensus is accurate, this would indicate significant growth in both sectors.
Powell sings inflation tune
Fed Chair Jerome Powell played a familiar tune before a congressional committee, saying that inflation remained transitory. However, Powell was forced to defend his stance before some skeptical lawmakers. Headline inflation rose 5% y/y in May, the highest in some 13 years, and Powell was pressed as to whether the economy was headed to the hperinflation of the 1970s and 1980s, when inflation was above 10%. Powell acknowledged that inflationary pressures where stronger than he had anticipated, but declared that hyperinflation was “very, very unlikely”.
Powell attributed most of the recent jump in inflation to the economic reopening and said he expected inflation to wane over time. Investors will be keeping a close eye on the Core PCE Price Index, the Fed’s preferred inflation indicator, which will be released on Friday.
EUR/USD technical
1.2055 switched to a resistance role last week, when EUR/USD fell sharply. Above, there is resistance at 1.2251.
There is support at 1.1756, followed by support at 1.1653.
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