The EUR/USD is currently trading near its highest level in over a month as traders eagerly await the release of key US inflation data that will impact future Fed policy. The currency pair has surpassed the 1.0825 resistance level, settling around 1.0815 at the time of writing.
Forex markets are on edge as strong wage growth in the eurozone earlier this year may not alleviate concerns among ECB officials regarding potential rate cuts. Negotiated wage increases in the first quarter have failed to slow down significantly, especially in Germany where wages have risen sharply.
While the initial deposit rate cut in June is expected to continue, hopes for another quick cut the following month are dwindling. Despite stronger-than-expected economic growth in the eurozone, wage gains are likely to have slowed to 4.3% year-on-year in the first quarter. This slowdown in wage growth may contribute to a further easing of inflation in the region.
Differences in wage negotiation processes across European countries add to the complexity of the situation. While some countries have contracts directly linked to inflation, others rely on periodic negotiations to set compensation levels. This diversity of approaches is reflected in the range of perspectives on wage growth projections.
Labor shortages in Germany and ongoing transport strikes are expected to put upward pressure on wages, with nominal wage growth likely to remain above 4% on a sustainable basis. Official data on negotiated wages is set to be released later this month, providing more clarity on wage growth trends in the eurozone.
On a technical analysis note, the EUR/USD currency pair is currently moving within an upward channel on the daily chart. A shift towards upward momentum would require a move towards resistance levels of 1.0830 and 1.1000, while a return to the support level of 1.0720 may signal a bearish trend towards the psychological support of 1.0600.
Overall, the future of the EUR/USD pair remains uncertain as traders await key US data and monitor wage growth trends in the eurozone.