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EUR Corrects Higher on Hot EZ CPI Release

  • Eurozone CPI came in well ahead of expectations, with the prelim January release hitting new record highs of 5.1% thanks to a particularly hot Italian inflation release (topping forecast by 1.3ppts). The EUR rallied to touch fresh session highs against the USD at 1.1305, while Bund futures briefly dipped to new daily lows.
  • EUR/USD now trades just shy of first resistance at the 1.1309 50-dma, with strength following the 3-day morning star reversal pattern printed at the Monday close. Nonetheless, gains for now are considered corrective, with the more medium-term trend view still pointed lower.
  • The greenback sits at the bottom of the G10 pile ahead of the Wednesday crossover, putting the USD Index on the backfoot for a third consecutive session, and through first support at the 96.10 50-dma. Dollar weakness comes alongside a further flattening in the US yield curve, with 10y yields a touch lower pre-NY hours.
  • ADP employment change data takes focus going forward, with markets expecting 184k jobs added - a material slowdown from December's 807k and supporting expectations for Friday's NFP release to come in below the prior month.
MNI London Bureau | +44 203-865-3809 |
MNI London Bureau | +44 203-865-3809 |

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