Euro Faces Headwinds as Analysts Await German Sentiment Data and U.S. Inflation Report

Euro Faces Headwinds as Analysts Await German Sentiment Data and U.S. Inflation Report

The euro’s early recovery from recent losses is encountering significant headwinds as analysts await two key economic reports: the German ZEW economic sentiment survey and the U.S. inflation data. Monex Europe analysts noted that despite the euro’s 0.2% rise to $1.1114, there are concerns about the sustainability of its rebound.

The German ZEW survey, scheduled for release at 0900 GMT, is expected to show improved sentiment in May. Last month’s figures were negatively impacted by the U.S. announcement of wide-ranging tariffs, which dampened investor confidence. However, analysts remain cautious, expressing skepticism that markets will experience the strong bounce that some are predicting.

Meanwhile, the U.S. inflation report is set for release at 1230 GMT. It is expected to show that inflation remained elevated in April, which could offer further support to the U.S. dollar. This would add to the pressure on the euro, as higher inflation in the U.S. would make it less likely for the Federal Reserve to ease its monetary policy in the near term.

On Monday, the euro dropped to a one-month low of $1.1066 following the temporary tariff reduction agreement between the U.S. and China. While the euro has managed to recover slightly today, these upcoming economic reports will be crucial in determining whether it can sustain its gains or if the dollar will continue to hold its ground.