EURUSD has been trading lower since the beginning of the day. The US dollar continues to recover against major currencies. In theory, the greenback might be strengthening due to better-than expected University of Michigan data. The headline Consumer Sentiment index for June reached 86.4, above last month’s result of 82.9 and higher than expected as well. It is worth to notice that the current conditions index fell slightly, whereas expectations among consumers are on the rise.
The set of data is particularly interesting as inflation expectations in the US declined. UoM’s 1-year inflation expectations came in at 4.0% (previously 4.6%). In addition to that, UoM’s 5-year inflation expectations fell from 3.0% to 2.8%. These are promising figures for both the equity markets and the Fed. The central bank may sigh with relief for a while, yet markets are set to focus heavily on the Fed’s inflation story during the FOMC meeting planned for next week. The Fed’s economic projections will certainly be in the spotlight - markets will focus on projected core PCE inflation among other metrics.
As far as EURUSD is concerned, there are some options expiring today, which could have provoked a bigger move on the main currency pair. Interestingly, one might notice that the ongoing move resembles the situation seen during November-January period. The pair returned below the short-term upward trend back then while then gap between the 50- and 14-period EMA faded away. EURUSD bounced off three times within the consolidation and the false inverse head and shoulders pattern. Only later did EURUSD experience a significant plunge.