The EURUSD Returns to the 1.08 Region as Investors Focus on US GDP and PCE Inflation

On Wednesday, EUR/USD retreated significantly, falling back to the 1.0800 handle as widespread risk appetite evaporated. As investors anticipate a series of mid-tier European economic indicators on Thursday, followed by an update on US quarterly Gross Domestic Product (GDP) growth, the pair is trading firmly into technical resistance.

It is anticipated that Pan-European Consumer Confidence will remain unchanged at -14.3% in May, whereas the aggregate Economic Sentiment Indicator will marginally improve from 95.6 to 96.2. Thereafter, later in the day, the Annualized Q1 GDP is anticipated to decrease marginally from 1.6% to 1.3%. Insatiable for rate cuts from the Federal Reserve (Fed), markets will be on the lookout for indications of economic softening in the United States, where robust growth, a constrained labor market, and persistently high inflation figures impede the Fed's ability to implement rate cuts at the rate that investors continue to seek.

At the moment, the CME's FedWatch Tool estimates the probability that the Federal Reserve will maintain current rates in September to be just under even. However, optimistic traders persist in seeking justifications to increase their wagers on rate cuts.

On Friday, the trading week will conclude with German Retail Sales, which are projected to decline 0.1% month-over-month in May. For the year ending in May, the Pan-European Core Harmonized Index of Consumer Prices (HICP) is anticipated to increase by a single basis point, from 2.7% to 2.8%. The trading week will conclude with US Core Personal Consumption Expenditures (PCE) Price Index inflation for April, which is anticipated to remain unchanged at 0.3% MoM.