EUR/USD Tumbles on Soft German Inflation Data

The EUR/USD declined on Tuesday after the release of a softer-than-expected German inflation report. A preliminary reading on German HICP inflation showed an increase of 1.1% in April. Economists were looking for a 1.3% rise in inflation.

Sellers hit the Euro because of expectations that the European Central Bank could be forced to ease monetary policy further to fight low inflation. Some investors believe the ECB is ready to implement a round of quantitative easing which is essentially bond-buying. The central bank is targeting an inflation figure of just under 2% in the medium term, but the high level of the Euro exchange rate may be weighing on the single-currency.

The GBP/USD rose on Tuesday. The Forex pair rebounded after an early session setback. Sellers came in to drive the Sterling lower against the Greenback after the latest U.K. GDP reading missed the estimate. Today’s report showed the economy grew by 0.8% in the first quarter for a year-over-year increase of 3.1%.

June Comex Gold posted a slight gain on Tuesday after completing a technical correction into a retracement zone at $1287.50 to 1282.99. Buyers stepped in following a test of this zone in an effort to form a potentially bullish secondary higher bottom. This move is usually a precursor to a change in trend to up.

Fundamentally, speculative buyers may be underpinning the market because of the possibility of an escalation of the conflict between Ukraine and Russia. Traders may be pricing in an impending invasion by Russian troops.

June Crude Oil futures closed higher after making a successful test of a retracement zone at $101.13 to $100.42. The move was essentially a reaction to the psychological support level at $100.00. The actual swing low was $100.33. The chart suggests a retracement to $102.21 to $102.66 is likely over the near-term.

Fundamentally, oversupply continues to remain an issue which could mean sellers will step in on the next rally. Position-squaring ahead of Wednesday’s weekly Energy Information Agency supply and demand report may also be contributing to this morning’s strength. Traders are pricing in an increase of 1.3M barrels. Last week, oil stocks increased by 3.5M.

This morning the U.S. Case-Shiller housing report showed an increase of 12.9% which hit the estimate. Conference Board Consumer Confidence, however, came in slightly below the 82.9% estimate at 82.3. On Wednesday, traders will get the opportunity to react to the latest U.S. GDP data and the Fed’s monetary policy announcement. On Friday, the U.S. will report April Non-Farm Payroll data.