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

By Reuters_News

13:38, 30 March 2023

Currency signs of the U.S. dollar and Euro are seen at a currency exchange office in Kiev, Ukraine June 9, 2020.
Currency signs of the U.S. dollar and Euro are seen at a currency exchange office in Kiev, Ukraine June 9, 2020.

- 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.

For more click on FXBUZ

US100

14,326.80 Price
+2.750% 1D Chg, %
Long position overnight fee -0.0255%
Short position overnight fee 0.0032%
Overnight fee time 21:00 (UTC)
Spread 3.0

BTC/USD

27,130.90 Price
+1.260% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 60.00

Gold

1,946.90 Price
+0.290% 1D Chg, %
Long position overnight fee -0.0185%
Short position overnight fee 0.0103%
Overnight fee time 21:00 (UTC)
Spread 0.60

XRP/USD

0.47 Price
+0.900% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.00370

 

 

 

Christopher Romano is a Reuters market analyst. The views expressed are his own

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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