Strong Consumer Inflation Data Fuels EUR/USD Rally

The EUR/USD surged on Tuesday after fresh data showed Euro Zone inflation rising for the first time in six months. The Forex pair saw its biggest gain in two weeks after the release of the stronger-than-expected consumer-price inflation report. Core inflation rose to 0.9% in May, from a record low 0.6% in April. The Euro was also boosted by reports that Greece’s creditors had reached an agreement on a proposal aimed at helping it overcome its abilities to meet its debt obligations.


The GBP/USD rallied on the news about Euro Zone inflation. Traders felt that if it was good for the Euro Zone economy, it would eventually help the U.K. economy. A boost in U.K. Construction PMI also underpinned the Forex pair. The report showed a reading of 55.9 versus estimates of 55.1.

The rally by the Euro helped drive the U.S. Dollar sharply lower. This price action underpinned August Comex Gold futures, producing a relatively modest gain of a little more that .25%. Gold prices continued to straddle a major 50% level at the daily chart at $1188.30. Yesterday’s volatile trading session may have kept investors on the sidelines today. If the break in the dollar turns into an extended move then look for gold to form a support base with $1206.50 to $1212.70 the initial upside objective.

July crude oil futures rallied on Monday. The move was triggered by the weaker dollar and short-covering ahead of Friday’s OPEC meeting. Although traders have expressed concerns recently about increased OPEC and U.S. production, the recent data from the U.S. Commodity Futures Trading Commission shows that speculators have raised their overall bullish bets in West Texas Intermediate oil futures for a second straight week. Tomorrow’s weekly oil inventories report is expected to show another weekly decline of 2.2 million barrels.

In today’s reports, U.S. factory orders for April showed a decline of 0.4 percent. March’s number was increased to 2.2 percent from 2.1 percent. On Wednesday, investors will get the opportunity to react to the latest ADP Non-Farm Employment Change report. This report is expected to show the private sector of the U.S. economy added 200K new jobs in May. 


Leave a Comment