Upcoming German Economic Sentiment and U.S. Inflation Data Weigh on Euro's Recent Rebound

Upcoming German Economic Sentiment and U.S. Inflation Data Weigh on Euro's Recent Rebound

The recent rebound in the euro faces challenges ahead as upcoming German economic sentiment data and the U.S. inflation report are expected to limit further gains, according to analysts at Monex Europe. Despite the euro rising 0.2% to $1.1114 on Monday, the currency struggled after hitting a one-month low of $1.1066 earlier in the day, following news of a preliminary tariff deal between the U.S. and China.

The German ZEW economic sentiment survey, set for release at 0900 GMT on Monday, is expected to show an improvement in May, after a weak reading in April, largely due to the imposition of U.S. tariffs. However, Monex Europe analysts remain cautious about the size of the euro’s bounce, noting that market expectations may be overblown.

Meanwhile, at 1230 GMT, the U.S. inflation report will provide further data on price pressures in the U.S. The report is expected to show that inflation remained elevated in April, which could lend support to the U.S. dollar as traders continue to factor in the potential for more interest rate hikes from the Federal Reserve.

With both the U.S. inflation report and the German ZEW survey potentially weighing on the euro, the euro-dollar exchange rate may face resistance in its attempts to continue its recovery.