EURUSD daily
The euro is in an interesting spot.
It fell to the lowest since November 13 today but is now trying to creep back above the Dec/Jan double bottom. It coes with some moderate bids in the stock market as well.
There is one camp around the CPI report that says it’s a game-changer for the Fed but there is another warning that seasonal quirks around the turn of the year can offer up misleading signals.
For their part, Goldman Sachs predicted core CPI at +0.38% and it ended up at +0.39% and in their preview, they had this to say:
“We expect a temporary boost to core CPI from start-of-year price increases, which we expect to be most pronounced in the prescription drugs, car insurance, tobacco, and medical services categories.”
Temporary is the key word there.
Still, the Fed has to play the cards it was dealt and there is a high risk some Fed officials could talk more about keeping rates higher for longer now or even hiking again. Thankfully, they get one more CPI report before the March dot plot but at it stands, there is a risk that many of them shift to fewer rate cuts.
As for the euro, I struggle to see a compelling reason to buy it because it faces challenges of its own on the economic side and rising bund yields aren’t going to help the struggling German economy.