February 22, 2024

EUR/USD Holds on to Profit Close to 1.0600

Prolonged USD Corrective Pullback Aids Euro

The EUR/USD currency pair is consolidating on its most recent gains under 1.0600. The US Dollar still continues to get sold unstopped with the cautious mood in the market. 

The US Dollar is going through a prolonged corrective pullback from a twenty-year high. The US Dollar had initially attained this height against its major fiat contenders. Investors are presently repositioning while awaiting the minutes of the FOMC meeting in May.

EUR/USD price chart. Source TradingView

Meanwhile, in Asia, the week started on a very strong note. This is in spite of the sell-off of tech that happened on Wall Street, Friday. Investors welcome the hope of Chinese economic recovery as they plan to reopen.

However, the news of the reopening came alongside new records of COVID in Beijing. It brought back worries that there might be another round of lockdown. There was also tech selling in China and it weighed on the market’s risk-off mood. 

The Euro got some support from the latest hawkish comments from European Central Bank officials. Policymakers in the European Union are giving indications of a July interest rate increase.

The President of the European Central Bank, Lagarde, said an increase is likely in July. It would be the first interest rate increase in more than ten years. But Lagarde undermined the thought of a 0.5 move in the midst of growth concerns.

While at that, more increase in the EUR/USD currency pair seems capped. This is the effect of the increased US Treasury bond yields. As a further result, traders are thriving on the expectation of hawkish moves from the Feds.

The US Federal Reserve is still ahead of the curve. This is despite the fact that the possibility of a 75 basis point diminishes. 

European Data to Aid the Euro

Going forward, the pair is waiting for the IFO Research for May from Germany. It is also waiting for the news on the Business Climate Index that’s expected at 91.4. The former figure for the Business Climate Index was 91.8.

There are very few items in the US docket but everyone expects the market’s sentiment. The EUR/USD continuous rebound now looks ahead to 1.0700 benchmarks.

In spite of the present increase for the pair, the Dollar general perspective is still negative. The negative territory holds much of the single currency firmly for now. 

The price action of the spot is expected to show the dynamics around the US Dollar. It is also expected to reveal political concerns as well as the Fed-ECB policy divergence.

Some strength around the Dollar might be reinforced by suggestions of an ECB rate increase. The rate increase is speculated to come up in June. But the Euro is supported by a number of factors including increased German yields.

Other factors that could support the Euro are elevated inflation rates. Equally in the box is a good pace in the economic recovery of the Eurozone. 

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