Deutsche Bank analysts, led by Jim Reid, report that the euro remains vulnerable against the US dollar as markets digest a firm US payrolls report, which reinforced perceptions of a resilient US labor market and persistent inflation risks [1]. The focus for the week is on a dense US data calendar, with the April Consumer Price Index (CPI) report seen as the pivotal event for shaping expectations around the US dollar and US yields [1].
Deutsche Bank economists project that headline inflation will rise by +0.58% month-on-month in April, a moderation from March’s +0.9%, but still considered relatively firm [1]. The core CPI measure is expected to accelerate to +0.39% MoM from +0.2%, indicating that underlying price pressures remain sticky even as energy-related effects diminish [1]. Year-on-year, headline CPI is forecast to move from 3.3% to 3.8%, while core CPI is expected to rise from 2.6% to 2.8% [1].
Following the CPI release, producer price data is due on Wednesday, with the remainder of the week shifting focus to activity indicators such as retail sales and industrial production [1]. Deutsche Bank anticipates retail sales will decline by -0.3% MoM after a strong +1.7% increase in March, suggesting some payback in consumer spending [1]. Industrial production is forecast to rise modestly by +0.2% MoM, following a -0.5% drop previously, indicating tentative stabilization in manufacturing output [1].
While the US payrolls report was not strong enough to decisively alter the policy outlook, it did little to ease concerns about persistent inflation, especially given solid wage dynamics [1]. The upcoming data releases are expected to be critical in shaping market expectations for the US dollar and yields in the near term [1].
CONCLUSION
The euro remains under pressure against the US dollar as markets await key US inflation and activity data. Persistent inflation risks and resilient labor market conditions in the US are likely to influence currency and yield movements in the coming days.