Mixed CPI Data

EUR is coming under fresh selling pressure today on the back of the latest set of eurozone inflation readings which offered mixed results. CPI for the single customs bloc was seen cooling to 5.5% last month, on the headline reading, down from 6.1% the prior month, and below the 5.6% level the market was looking for. However, core CPI was seen rising on the prior month at 5.4% vs 5.3% last. While below the 5.5% the market was looking for, the data shows that eurozone inflation is still not falling at a linear pace and is putting further pressure on the ECB to take additional action.

Growth Fears Hurting EUR

The ECB has been clear in its guidance that further hikes will be needed. Currently, the market is pricing in around two further rate hikes this year. However, with the ECB warning that peak rate are unlikely to be called in the near-future, and with inflation showing stickiness at more than double the bank’s target, hawkish risks are growing. In terms of market reaction, the bigger concern now appears to be over the growth outlook for the eurozone. With inflation still elevated and further tightening expected, recession risks are growing, weighing on EUR.

Technical Views

EURJPY

The rally in EURJPY has lost steam ahead of the 160 level. While price remains well within the bull channel which has framed the recent rally, weakening momentum studies suggest room for a deeper pull back. To the downside, the key area to watch will be the bull channel lows and the 152.13 level support. Bears will need to see a break of this area to negate the broader bullish view.