- EUR/USD stays depressed inside a two-week-old trading range.
- Hawkish Fedspeak, risk-off mood underpins USD strength, Euro struggles on softer ECBspeak, Russia-Ukraine tussles.
- US CPI for April will be crucial amid hopes of an easy number, chatters surrounding Fed’s 75 bps rate hike.
- ECB’s Lagardge eyed for clarity over the widely-discussed July rate lift.
EUR/USD refreshes intraday low around 1.0525, extending the previous day’s downbeat performance during Wednesday’s Asian session, as global markets turn cautious ahead of the all-important US inflation data for April. Also favoring the pair sellers are the recently hawkish Fedspeak, as well as covid and geopolitical risks.
Recently, Atlanta Fed President Raphael Bostic mentioned that the US economy is strong and demand is high while also expecting the neutral rate at 2.0-2.5%.
Before that, multiple Fed policymakers crossed wires to convey their take on the US central bank’s next moves on Tuesday. Most of them, including Federal Reserve Bank of Richmond President Thomas Barkin and NY Fed President John Williams, backed a 50 bps rate hike. However, comments from Cleveland Fed President and FOMC member Loretta Mester recalled the bears as she said, “They don't rule out a 75 basis points rate hike forever”.
On a different page, China sticks to its “Zero Covid Tolerance” policy despite the World Health Organization’s (WHO) push to ease the rigid activity restrictions in Shanghai and Beijing. The lockdowns in the world’s largest industrial players pose a serious threat to the global supply chain and growth prospects.
Also weighing on the risk appetite, as well as on the EUR/USD prices, are the tales of the Russia-Ukraine war and its likely negative implications of the same. Recently, Europe has had to divert its gas flow from Russia which previously used to arrive via Ukraine.
Additionally, downbeat prints of Germany’s ZEW Survey details, suggesting the record low of market expectations, also contributed to the EUR/USD pair’s bearish trajectory.
Amid these plays, the US 10-yer Treasury yields remain pressured around 2.99% whereas the S&P 500 Futures seesaw around the 4,000 level after a mixed closing on Wall Street.
Moving on, the EUR/USD pair traders will initially pay attention to Germany’s Harmonized Index of Consumer Prices for April, expected to remain unchanged at 7.8% YoY, ahead of observing ECB President Christine Lagarde’s say on the July rate hike. However, a major focus will be on the US Consumer Price Index ex Food & Energy figures which are likely to ease to 6.0% YoY versus 6.5% prior.
Should the inflation data fail to match the anticipated softness, the US dollar could extend the latest bullish trajectory towards a refreshing multi-year high on the Fed policymakers’ recently hawkish comments.
Read: US April CPI Preview: Has inflation peaked?
Technical analysis
A fortnight-old range between 1.0470 and 1.0640 restricts short-term EUR/USD moves. However, recently downbeat MACD and RSI signals join brighter chances of disappointment from scheduled data/events to keep bears hopeful.
