Forex News

EUR/USD struggles amid hawkish comments and sour sentiment

Published by
Nonhlanhla P Dube
  • EUR/USD is facing downward pressure, down 0.05% near 1.0965, due to hawkish comments from the ECB and the Federal Reserve amid sour sentiment and anxious mood ahead of key catalysts.
  • The risk profile is being influenced by mixed earnings, downbeat US data, the US House China Committee’s discussion about the Taiwan invasion scenario, and a likely drag on the US debt ceiling decision.
  • Final readings of the bloc’s inflation numbers and the monthly print of the Fed’s Beige Book will precede EUR/USD traders’ entertainment as they continue to witness consolidation of the previous day’s gains amid a mildly offbeat mood.

EUR/USD has retreated towards 1.0950, reversing the gains from the previous day and down 0.05% near 1.0965 as of very early Wednesday morning in Europe. The Euro pair struggles to justify hawkish comments from the European Central Bank (ECB) and the Federal Reserve (Fed) officials amid sour sentiment and anxious mood ahead of key catalysts.

Recent discussions surrounding the US House China Committee’s scenario of a Taiwan invasion and the likely drag on the US debt ceiling decision have exerted downside pressure on the risk profile. Moreover, the recently downbeat US data and hawkish Fed bets have also contributed to the risk profile’s decline. In addition, mixed earnings have prodded the risk profile and supported the US Dollar’s corrective bounce. Bloomberg’s news release suggesting China’s role in the Russia-Ukraine war and US President Joe Biden’s resistance to negotiating the debt limit have also weighed on sentiment.

St. Louis Federal Reserve President James Bullard said on Tuesday, in an interview with Reuters, that “Interest rates will need to continue to rise in the absence of clear progress on inflation.” On Monday, Richmond Fed President Thomas Barkin said that he wants to see more evidence of inflation settling back to target. Recently, Atlanta Fed President Raphael W. Bostic mentioned that the economy is still gaining momentum, but inflation is too high.

On the other hand, ECB Chief Economist Philip Lane stated on Tuesday that the Euro Area economy would not go into a recession, and some banking tensions have receded, and negative supply shocks are receding.

Despite mostly upbeat EU data, the downbeat US housing figures have prodded the EUR/USD bears. However, the latest ZEW Survey data signals that Germany’s headline Economic Sentiment Index worsened in April to 4.1 from 13.0 in March, versus the market expectation of 15.1. The Current Situation Index improved to -32.5 from -46.5, compared to analysts’ estimation of -40.0. On a broader front, Eurozone ZEW Economic Sentiment Index dropped to 6.4 for April compared to 10.0 prior and 19.8 market forecasts.

In the case of the US data, the US Housing Starts and Building Permits roiled the mood with downbeat prints for March on Tuesday. However, the NY Empire State Manufacturing Index and the US National Association of Home Builders (NAHB) housing market index marked upbeat prints on Monday and allowed the US Dollar buyers to remain firmer.

Against this backdrop, S&P 500 Futures retreated from the highest levels since early February, marked the previous day, as it prints mild losses near 4,178. The US 10-year and two-year Treasury bond coupons dropped for the first time in four days by the end of Tuesday, sluggish around 3.59% and 4.21% by the press time.

EUR/USD traders may witness further consolidation of the previous day’s gains amid a mildly offbeat mood. The final readings of the bloc’s inflation numbers, per the Harmonized Index of Consumer Prices (HICP) gauge for March, will precede the monthly print of the Fed’s Beige Book to entertain the pair traders.

Technical analysis shows that a one-month-old ascending trend channel keeps EUR/USD buyers hopeful unless the quote breaks the 1.0925-1105 channel area.

Nonhlanhla P Dube

Nonhlanhla P Dube is a senior news reporter at Rateweb. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her directly by email at nonhlanhla@rateweb.co.za

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Published by
Nonhlanhla P Dube

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