FX.co ★ Rising inflation in the Euro area pushes EUR/USD down

Yesterday's collapse in stock markets indicates the negative expectations of market players that the global economy will fall into a deep recession. This could intensify after today's data on EU inflation, which, according to the forecast, should increase 8.1% y/y and 0.8% m/m.

More than once, projections on EU inflation point to stable growth, but real data always turn out to be different. There is a risk that inflationary pressure will resume, especially since the ECB has not done anything to curb it, only declaring a potential rate hike in July. Aso, real structural problems and high prices, primarily on energy resources and food, stimulate inflation on the wave of the money supply previously thrown into the financial system.

What will the ECB do if inflation grows? Most likely, no action will be taken before the July meeting as the government hopes that inflation will stabilize by itself. However, this move may lead to the political collapse of the EU.

Forecasts for today:

EUR/USD

The pair is trading above 1.0400. A decline below it will trigger a further fall to 1.0400.

GBP/USD

The pair is moving down. If it falls below 1.2265, the quote is likely to head to 1.2180.