Euro Update: EUR/USD Holds Early Gains After EU GDP Release, US CPI Looms

EUR/USD Price, Chart, and Analysis

• Euro Area growth estimates are in line with forecasts.
• US CPI is the next macro driver of note.

Most Read: US Bond Yields Rally Further Ahead of a Major US Inflation Report

In the fourth quarter of 2022, seasonally adjusted GDP increased by 0.1% in the Euro Area and remained stable in the EU, compared with the previous quarter. In the third quarter of 2022, GDP grew by 0.3% in both the Euro Area and the EU, according to the official release published by Eurostat, the statistical office of the European Union.

Eurostat GDP Release

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The European Commission’s Winter Economic Forecast, released yesterday, said that the EU economy is set to avoid recession but ‘headwinds persist’. The Winter interim Forecast's projected growth for 2023 of 0.8% in the EU and 0.9% in the euro area is respectively 0.5% and 0.6% higher than in the Autumn Forecast. In further positive news, the inflation forecast was revised lower. Headline inflation is forecast to fall from 9.2% in 2022 to 6.4% in 2023 and to 2.8% in 2024 in the EU. In the euro area, it is projected to decelerate from 8.4% in 2022 to 5.6% in 2023 and to 2.5% in 2024.

European Commission Winter 2023 Economic Forecast

The Euro kept its earlier gains against a marginally weaker US dollar with EUR/USD changing hands around 1.0760. The latest US inflation report, scheduled to be released at 13:30 GMT, will be the next driver of price action across a swathe of markets and may shed some more light on the path of US rates in the months ahead. Both annualized core and headline inflation are set to ease but any deviation from current market expectations will likely prompt a bout of volatility.

EUR/USD Daily Price Chart – February 14, 2023

Charts via TradingView

Retail Traders Cut Longs, Increase Shorts

Retail trader data show 48.99% of traders are net-long with the ratio of traders short to long at 1.04 to 1.The number of traders net-long is 15.70% lower than yesterday and 16.54% lower from last week, while the number of traders net-short is 22.56% higher than yesterday and 10.71% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD-bullish contrarian trading bias.

What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.