EURUSD Rallies on Upbeat German Inflation, Weak US GDP Data

The EURUSD currency pair was trading up over 70 pips, boosted by the upbeat German consumer inflation data released earlier today. The Gemrna CPI came in at 7.4% beating analysts' expectations of 7.3%. The German harmonised CPI print was recorded at 7.8%, above consensus estimates of 7.5%.

The upbeat German CPI data, which represents a decline from previous figures, boosted the single currency leaving it to hit new weekly highs above 1.0900. The currency pair barely reacted to the Eurozone consumer confidence data released earlier today, which met analysts' expectations of -19.2.

The Eurozone business climate indicator also came in at 0.7, as expected. However, the German data drove the euro higher, given that Germany is the Eurozone’s largest economy. The currency pair also benefited from the negative investor sentiment towards the US dollar. 

Investors and analysts are already pricing in a pause in the Fed’s rate hikes at its next meeting in March after the US banking crisis that saw three banks collapse and left one teetering on the brink of a collapse. 

Furthermore, the dollar’s weakness was also attributed to the lower final Q4 GDP data released in the American session, which saw the US Bureau of Economic Analysis revise the final Q4 GDP growth figure to 2.6% from the initial figure of 2.7%. 

The decline in German and Spanish inflation data could indicate that the rate hikes implemented by the European Central Bank (ECB) are working; hence, the central bank may not have to keep hiking rates at its next Governing Council meetings. 

The release of the US initial jobless claims data also contributed to the dollar’s weakness as the initial claims rose to 198,000, beating analysts’ expectations of 196,000 new claims. The higher figure could indicate that the US job market is finally weakening. 

However, investors must wait for the release of the non-farm payrolls next month to gauge the strength of the US jobs market properly. Investors will also be looking forward to tomorrow’s US Personal Consumption Expenditure (PCE) report, which is the Fed’s preferred inflation indicator to determine if the Fed will keep hiking rates. 

*This is not investment advice. 

The EURUSD price chart.

The EURUSD currency pair was trading up 73.2 pips (0.68%) as the euro rallied against the US dollar.