On Monday, the US stock market closed with a decline after it closed the previous week on a positive note.
On Tuesday, futures on the main US indices consolidated near the closing levels of the previous day. There are no reasons for a particular movement.
Market participants are trying to find a catalyst in the bulk of macroeconomic data.
Investors also have taken the wait-and-see approach because Wall Street has started its reporting period for the first quarter. The reports will be revealed by banks and financial companies this week.
The same situation can be observed in the currency market.
The euro/dollar pair has been moving in a narrow channel for the fifth day in a row. It still needs a short-term impulse.
On Monday, the greenback dropped by 0.1% against a basket of major currencies. The fact is that traders were waiting for the publication of the US inflation and retail sales data. Moreover, yield on the US treasuries bonds was below its recent highs.
Ahead of the publication of the consumer price data for March, the US dollar index advanced by almost 0.2% to 92.27 points, but later it dropped.
According to the report, in March, the US consumer prices rose by 2.6% on a yearly basis. Inflation accelerated compared to 1.7% in February. The indicator showed the highest paces of growth in more than 2.5 years, that is since August 2018.
Analysts expected that strong CPI figures would increase concerns about inflation and support the US dollar. However, the US national currency slid together with the yield on the US bonds.
The fact is that one report could hardly determine the future trend.
The US Fed officials will admit a rise in prices only if it is long-lasting.
Analysts, who expect a surge in inflation, suppose that it may take place only in the next month. Two months of a sharp rise could form a trend.
Some experts think that the Fed may raise the key interest rate this year amid bigger government spending and inflationary pressure. However, there are fears that the economic growth may slowdown as soon as stimulus measures are withdrawn.
"A big rate of change acceleration in both growth and inflation data with long dated US yields likely headed higher – not time to ditch reflation trades," specialists at Saxo Bank said.
Although yield on the US 10-year bonds has soared since the beginning of this year, it has failed to reach the pre-crisis level of 2% logged in at the beginning of 2020.
"How Treasury yields react to this week's supply and to key U.S. data releases will undoubtedly provide direction for the USD in the near-term," Rabobank currency strategist Jane Foley wrote in a report.
"A strong (CPI) print may re-invigorate inflation fears and lend support to the USD," they added.
By the moment, the euro/dollar pair managed to stop its recent depreciation.
Despite lockdown measures in the leading EU countries, low vaccination paces, and downwardly revised estimates of the French and Spanish GDP, the euro is showing confidence.
On Monday, the euro/dollar pair received support from the eurozone retail sales data. In February, the indicator advanced by 3%, twice exceeding expectations of market participants .
Against this background, the pair jumped to 1.1917, but closed only at the level of 1.1912, gaining more than 0.11% during the day.
The euro slid to $1.1885 ahead of the publication of the US consumer price data. After the release of the report, the euro jumped to $1.1939.
Experts suppose that the euro/dollar pair has all chances to rise. However, the appreciation is mainly supported by the weakening dollar.
Notably, a rise in the euro does not reflect the problems in Europe. For example, Germany cannot cope with the spread of COVID-19.
According to the ZEW research, in April, economic sentiment in Germany slumped to 70.7 points from 76.6 points in March. This is the first drop since last autumn, which reflects the gloomy mood of investors.
The euro/dollar pair may also react to speeches provided by Cristine Lagarde and Jerome Powell.
According to the forecast, the US inflation may rise in the next few months. Uncertainties over its stability are boosting the US dollar.
At the same time, Europe has faced the opposite problem. Fabio Panetta, Member of the Executive Board of the ECB, said that the regulator cannot delay any more the inflation rise to the targeted level. Despite the extremely loose monetary policy, European governments are implementing fiscal support too slowly.
"The first quarter witnessed the single currency depreciate by around 4% versus the USD. Real money and speculative investors pared EUR holdings amidst concerns over eurozone recovery hopes being compromised by a third Covid wave. While the agreement on the EU rescue fund was a truly groundbreaking decision, the failure to push forward and actually disburse the funds remains an ongoing concern," experts at CIBC noted.
Since the beginning of April, the euro recouped more than one third of its losses against the US dollar.
Recovering from the low of this year logged at 1.1700, the euro/dollar pair faced strong resistance near 1.1930-1.1940. If the price breaks this area, it may reach 1.1980-1.1990 (highs logged in the middle of March). The next resistance level is located at 1.2000. Support levels are situated at 1.1860, 1.1820, and 1.1780.
