Euro News and Talking Points
- EuroZone inflation rises to 1.4%, while core inflation remains subdued.
- EURUSD little changed after inflation with trade wars likely to dictate price action.
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ECB Hawks Disappointed by Benign Inflation Figures
EuroZone flash inflation readings for March showed the headline rate rising to 1.4% from previous 14-month low of 1.1%, which was in-line with expectations. However, the core reading (strips out food, energy, alcohol and tobacco) printed at 1.0% vs. expectations of 1.1%, somewhat disappointing the ECB hawk’s with the release still some way off the ECB’s price target (close to, but below 2%). This also backs up recent comments from President Draghi who reiterated that core inflation remains subdued.
EURUSD relatively steady after the inflation report, which trades slightly below the 1.23 handle, given that the report is largely in-line with what the ECB expects. Most recent staff macroeconomic projections see 2018 annual inflation at 1.4%. Much of the price action likely to be dominated by the ongoing trade spat between the US and China, with the latter earlier announcing USD 50bln worth of tariffs on US imports, which in turn saw a bid in EUR, hitting a high of 1.2315.
EURUSD Price One Minute Time Frame (April 4, 2018)
Retail Traders Short EURUSD, Outlook Mixed
Retail trader data shows 43.2% of traders are net-long with the ratio of traders short to long at 1.31 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.06246; price has moved 15.6% higher since then. The number of traders net-long is 9.8% higher than yesterday and 26.5% higher from last week, while the number of traders net-short is 7.8% higher than yesterday and 5.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EURUSD price trend may soon reverse lower despite the fact traders remain net-short.
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What’s your opinion on the Euro? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Justin.mcqueen@ig.com or via Twitter @jmcqueenfx
--- Written by Justin McQueen, Analyst
