BUZZ-COMMENT-EUR/USD bulls now look for US PCE to intensify tail winds

March 30 (Reuters) - EUR/USD struck a 5-session high Thursday with help from German inflation data and interest rate spreads, and longs now hope U.S. February PCE, the Fed's favorite pricing indicator, can reinforce the upward momentum.
German March HICP dropped from February's levels but came in higher than estimates. Euro zone interest rates rallied to fresh short-term highs. September Euribor futures price struck an 11-session low as investors pare back expectations for ECB rate cuts while German government 2-year yields hit an 11-session high.
The rate moves further eroded the dollar's yield advantage over the euro. The German-U.S. 2-year yield spread , which EUR/USD is positively correlate with, tightened to -137.5 bps and is poised to break the 15-month tight set on March 22.
Investors are now focused on U.S. February core PCE. Month-on-month PCE is estimated to fall to +0.4% from 0.6% while year-on-year is expected to remain at 4.7%. Below-forecast results would force U.S. rates lower as investors price in an increasing probability of the Fed pausing hikes before pivoting to cuts as markets project for Q3 .
That could lead EUR/USD to test February's high.
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Christopher Romano is a Reuters market analyst. The views expressed are his own