EUR/USD Daily Fundamental Analysis for April 29, 2011

The EUR/USD pair continued to hold the gains on Thursday in the aftermath of the feds pledges to keep rates low and continue the loose monetary policy in support of the recovery.

The euro rallied higher and eyes $1.50 to reach above $1.4882 the highest since December 2009 as the dollar continued the southern trip. Greenback remained week and the dollar index gauging its performance versus its six major trading partners slumped to the lowest since at least July 2008.

Rate bets on the euro backed by a hawkish ECB remains the positive support for the common currency which is muting debt problems that are shaking the area. The data on Thursday also helped sustain the gains with German unemployment dropping below 3.0 million for the first time since 1992 bolstering spending outlook and growth support.

The US economy also expanded in the first three months of the year, and although slower than expected with 1.8% it still held the market sentiment to positive.

Still, the main focus is monetary tightening and with that Friday will be another crucial day for the euro with important figures on the queue with the focus on inflation.

The data from the euro area starts on Friday at 08:00 GMT with the M3 Money Supply for March and expected with a rise by 1.9% from 1.7% to an annual 2.2% from 2.0% which will be taken as hawkish amid a market reasoning any hint to be a sign for ECB tightening.

Nevertheless, the more important is 09:00 GMT Eurostat Flash CPI estimate for April and expected higher at 2.7% from 2.6% which surely if confirmed a strong support for the euro.

Also at 09:00 GMT we have confidence figures on the queue for April. The figures are expected with a drop as inflation, ECB tightening and the uncertainty start to pressure the area.

Unemployment is also to be released and expected steady at 9.9% at 09:00 GMT especially after German unemployment held at 7.1%.

The inflation figures are the most important and the rise will bolster the euro’s appeal, while a drop or below estimates will weaken the euro and send the focus to the drop in confidence and delay the bets on the hike.

Still, the bets are on rates and they remain on the ECB over the feds and that is the general upside bias for the EUR/USD.

From the US On Friday, the world’s largest economy is to release the Income Report for March at 12:30 GMT. Expectations indicate income to rise to 0.4% from 0.3% while spending will decline to 0.5% from 0.7%. Core PCE is expected with a drop on the month to 0.1% from 0.2% and steady on the year at 0.9%.

Furthermore, the world’s largest economy is to release the Chicago PMI for April at 13:45 GMT and expected to slow to 68.2 from 70.6. The US University of Michigan confidence final reading for the month of April is due at 13:55 GMT and expected with an upside revision to 70.0 from 69.6.

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