- EUR/USD consolidates ECB-led declines amid USD pullback, braces for the first positive week in five.
- US Senate passes $14.00 billion bill to help Ukraine, $1.5 trillion to avoid shutdown.
- ECB tried Fed moves but couldn’t hide economic fears, US inflation added fuel to DXY run-up.
- UN Security Council meeting on Russia’s request, US Michigan Consumer Sentiment eyed for fresh impulse.
EUR/USD licks post-ECB wounds while making rounds to 1.1000, up 0.15% intraday during the mid-Asian session on Friday.
The pair’s latest moves could be linked to the market’s confusion over the key risk catalysts, as well as USD pullback. Even so, the major currency pair remains on the way to snap the previous four-week losing streak.
The US Senate’s passage of a $13.6B package to help Ukraine and $1.5 trillion bill to avoid looming government shutdown could magnify the Western aid to Kyiv and can be witnessed in today’s United Nations (UN) Security Council, which in turn weigh on EUR/USD prices. On the same line, concerns over a fresh jump in China’s covid cases, as well as fears concerning the Russian invasion of Ukraine, exerted downside pressure on the quote. Also contributing to the pair’s weakness could be the previous day’s US inflation data and the following hopes of faster rate hikes from the Fed.
Alternatively, indecision over the Russian military’s position in Ukraine and a lack of major data/events in Asia seem to restrict EUR/USD downside. That said, reports of a Russian military attack on Kharkiv institute that contains an experimental nuclear reactor initially challenged the market’s mood before the news of no negatives tamed fears. In the same way, chatters swirled that Moscow’s forces are gradually dispersing and may be retreating also favored the optimists before the US Satellite company Maxar’s update suggesting more troops being redeployed.
Amid these plays, S&P 500 Futures drop 0.5% on a day while the US 10-year Treasury yields drop 4.4 basis points (bps) to 1.965% by the press time. Further, the US Dollar Index (DXY) remains indecisive around 98.50 but stays determined to snap the previous four-week uptrend.
It’s worth noting that the European Central Bank (ECB) cited challenges to inflation while releasing details faster Quantitative Tapering (QT) the previous day. However, the Euro traders concentrated more on the downbeat growth forecasts and upwardly revised inflation expectations to drag the bloc’s currency. “The statement from the ECB, which left the door open to an interest rate hike before the end of 2022 as soaring inflation outweighs concerns about the fallout from Russia's invasion of Ukraine, briefly sent the euro higher, before market sentiment turned negative,” said Reuters.
On the other hand, the risk-off mood joined fresh 40-year high US Consumer Price Index (CPI) prints of 7.9% YoY to propel the US Dollar the previous day. It should be noted that CME’s FedWatch Tool flash 94% probabilities of 50 basis points of a rate-hike March at the latest.
Looking forward, the UN meeting and updates from Ukraine could keep the driver’s seat while the US Michigan Consumer Sentiment Index for March, expected 61.3 versus 62.8, will also be important to follow for fresh EUR/USD directions.
Technical analysis
Unless crossing January’s low of 1.1120, EUR/USD bears remain hopeful of refreshing the recently marked multi-month low near 1.0800.