Euro Recovers Above 1.1700 as ECB Rate Hike Expectations Counter Stronger US PPI

• EUR/USD rebounds to around 1.1720 in Thursday’s early Asian session. 
• ECB is expected to hike its deposit rate next month, according to a Reuters poll.
• US PPI jumped by 6.0% YoY in April, hotter than expected. 

The EUR/USD pair recovers some lost ground to near 1.1720 during the early Asian session on Thursday. The Euro (EUR) edges higher against the US Dollar (USD) on hawkish signals by European Central Bank (ECB) officials. Traders will take more cues from the US Retail Sales report for April, which is due later on Thursday. 

ECB policymaker Joachim Nagel said on Wednesday that the probability that the central bank will need to raise borrowing costs due to the Iran war is rising. Meanwhile, ECB Chief Economist Philip Lane argued that officials must carefully study the fallout on growth and inflation before making a judgment call and that determining the appropriate monetary policy stance is a judgment call.

The majority of economists, around 85%, expected the ECB to raise its deposit rate by 25 basis points (bps) to 2.25% in June, up from just over half who expected that before the April meeting, according to a Reuters poll.

On the other hand, the US Bureau of Labor Statistics on Wednesday revealed the hottest wholesale inflation reading since late 2022, with the US Producer Price Index (PPI) jumping by 6.0% YoY in April. This reading followed the 4.3% seen in March and was above the market consensus of 4.9%. 

On a monthly basis, the PPI inflation climbed to 1.4% in April from 0.7% in March and was much higher than the anticipated 0.5%. Hotter-than-expected US PPI inflation data might help limit the Greenback’s losses in the near term.