Gains for USD on All Fronts

The currency pair of the Euro and US dollar has got some stability at a new annual low point just a bit over the 1.0700 area while trade was early in the US on Monday. The US dollar made considerable gains across several platforms, although there was a strong risk-off mood in the general stock market.

EUR/USD price chart. Source TradingView

At the present 1.0720 level, the EUR/USD currency pair is trading at a loss of nearly 0.7% on the daily trade chart, and it is going to be the worse trading day for the pair since the 5th of April, as it sees losses almost on an equal level with the GBP/USD currency pair, although not as severe as other currencies in the G10/USD circle that is risk-sensitive.

Reuters cited sources at the European Central Bank during the weekend who gave highlights of some urgency moving around policymakers at the European Central Bank in order for them to bring an end to the net QE buying as soon as they can make it happen. The sources quoted by Reuters also gave hints in the direction of many possible rate increases between July and the end of the year. This set of news did not in any way impact the Euro upwardly on Monday.

The Case for More Policy Tightening

For all the traders of the EUR/USD currency pair know, the hawkish shift of the European Central Bank recently as it seeks to end QE and begin increasing interest rates in Q3 has gotten countered by a relatively larger hawkish stance by the US Federal Reserve.

That, to some extent, explains why the EUR/USD pair was able to marginally maintain long rallies while it has a background of a risk appetite elevated geopolitical and economic situation in Europe, intensified by the war between Russia and Ukraine. The GDP from the US and the Eurozone are scheduled to be published later this week, but they are not likely to pull the pair out of the situations that have been mentioned.

The central PCE data on inflation for the month of March in the US and the first consumer price inflation number in Europe for the month of April will be keenly watched out for as they are both still expected to reveal high levels of inflation. Those inflation data keep being the basis for more ECB and Federal Reserve monetary policy tightening.

The EUR/USD pair might fade rallies as near-term bearish traders look towards the pair reaching 2020 low levels at 1.0630.