10:27 AM EDT, 05/31/2024 (MT Newswires) -- Traders should buy EUR/USD and target a move up to 1.1074 because the disinflation trend in Europe has stalled and this is likely to see the euro benefit from higher bond yields in the near-term, according to Spectra Markets' Brent Donnelly.

"Inflation this month came in high relative to expectations and looks like it might be turning a corner," said Brent Donnelly, president at Spectra Markets, in a note to clients on Friday

"There is a possibility of a higher-for-longer narrative taking hold in Europe as this inflation, and German wage growth

solid above 6% for the past two years, don't scream 'CUT!'," he added.

Donnelly told clients to buy EUR/USD with a stop-loss around 1.0744 and a target of 1.1074 for next week after European inflation edged higher and surprised on the upside of expectations for May this Friday.

He says that leaves the European Central Bank in an interesting spot because it all but promised to cut interest rates at next Thursday's meeting and could now feel compelled to adopt a less dovish interest rate posture for the months ahead.

"I think this means that the runup trade into the ECB will be higher EU yields and a stronger euro," he said.

EUR/USD rose 0.38% to 1.0870 on Friday after being lifted by May's inflation figure and a broad weakening of the US dollar, which fell after the MoM reading of the core PCE price index suggested the US disinflation trend likely resumed in April.