Eurozone inflation preview: EUR/USD's rise may be dented by a miss on expectations

Core eurozone inflation is set to advance from 1.1% to 1.2%. The ECB may enact stimulus in response to coronavirus, and inflation may have an impact, according to Yohay Elam from FXStreet.

Key quotes

“Headline Consumer Prices Index is projected to drop from 1.4% to 1.2% amid falling energy prices, and markets will likely see through that and eye Core CPI. Here, a small increase from 1.1% to 1.2% is on the cards.”

“If Core CPI comes out at 1.2%, EUR/USD has room to edge lower, as it would still leave the common currency exposed to a correction.”

“A disappointing level of 1.1% or lower could serve as the spark a more significant correction as it would allow the ECB to add more stimulus.” 

“If underlying inflation rises to 1.3% it could keep the bank on the sidelines as economic data would not warrant action. EUR/USD could extend its gains within overbought conditions.”