The Euro zone posted mixed fundamentals with the economy growing strongly and unemployment falling slightly while consumer prices dropped yet again into deflation territory. The flash estimate for Euro zone gross domestic product rose 0.6% in the first quarter from the previous quarter, compared with expectations for growth of 0.4%, according to Eurostat. On an annual basis, Euro zone's economic activity expanded 1.6% in the first quarter, the same as in the quarter to December, while analysts had forecast a rise of 1.4%. Meanwhile, unemployment in the Euro zone for March declined slightly to 10.2%, the lowest rate recorded in the region since August 2011, from 10.4% in the previous month. However, annual inflation rate in the euro area remained in negative territory for the third consecutive month in April. The latest flash estimate showing that consumer prices declined 0.2% in April, from a flat reading of 0.0% in March. On an annual basis, core inflation, which strips out volatile prices such as those for oil and food, climbed 0.8% in April, down from the 1.0% build seen in March. The data came after the European Central Bank deployed further stimulus measures in March in an attempt to underpin growth and inflation, which is currently a way off from the bank's target of below, but close to, 2%.
The Fed's favourite inflation barometer slowed in March, falling from one-and-a-half-year highs, while consumer spending ebbed. The price index for personal consumption expenditures excluding food and energy ticked up 0.1% in March, following a revised 0.2% gain. The rate of inflation over the past 12 months slid to 1.6%. In the previous two months, the core deflator was growing 1.7% year-on-year, the quickest pace since mid-2014. Inflation is being restrained by a strong Dollar and cheaper energy. A tightening labour market also failed to generate strong wage gains, contributing to moderate consumption growth. In March, consumer spending, which accounts for more than two-thirds of U.S. economic activity, ticked up 0.1% after an upwardly revised 0.2% gain in February. Consumer spending is expected to pick up momentum as wages steadily rise. Personal income climbed 0.4% in March after nudging up 0.1% in February. Meanwhile, confidence among America's shoppers worsened for the fourth straight month in April. The Thomson Reuters/University of Michigan preliminary consumer confidence index declined to 89.0 points in April, down from the final 91.0 reported in March, when it had dropped to a fresh five-month low. The current economic conditions sub-index improved to 106.7, while the indicator tracking future expectations declined 4.8 points to 77.6 during the reported month.
Upcoming fundamentals: EU PMIs, while Draghi and Jordan speak
EUR/USD to tackle April high amid rally
Advance of the Euro against the Greenback was stretched over the American session on Friday, as the market allowed for a spike up until the 1.1450 mark. Although the pair fell short of reaching the April high at 1.1465, we foresee such a scenario later in the new week. However, at 1.1468 the bulls will face another resistance represented by various 2015-2016 peaks in this area. The second supply for this week is placed at 1.1538 (weekly and monthly R1). In the meantime, dips lower are still expected to be shallow and the weekly/monthly pivot points are expected to act decisively at 1.1376.SWFX sentiment is 60% short
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade at 1.12 by July
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between April 2 and May 2 expect, on average, to see the currency pair around 1.12 by the end of July. Though 54% (-1%) of participants believe the exchange rate will be generally below this level in ninety days, with 43% (+1%) alone seeing it below 1.08. Alongside, 24% (+2%) of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on July 31.