EUR / USD consolidates near seven-week highs above 1.2200 ahead of more Fed statements

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  • EUR / USD rose to new seven-week highs above the 1.2200 level on Thursday.
  • End-of-month flows and technical buying appeared to be driving the move, with most of the data ignored.

The EUR/USD It broke above a key technical resistance area between 1.2180-90 early on during European trading hours and is now consolidating at 1.2225, just below the previous session (and seven week) highs at 1.2245. Currently, the pair is trading at gains of around 0.5% or nearly 70 pips for the day, with the euro (for once!) Being the best performing currency in the G10.

Performance of the day

End-of-month flows are cited as the main factor behind Thursday’s move in favor of the euro and against the US dollar. The aforementioned major technical breakout to fresh seven-week highs is also likely to play a role. The euro also appears to be picking up some support through its other crosses, most notably EUR / GBP, which has bounced more than 70 pips on the day to the 0.8675 region, a decent recovery from Wednesday’s lows below below. 0.8550.

Aside from the above, there is no clear rationale as to why the euro should be performing so well on the day. European bond yields have increased, but to a similar degree to the rise in US bond yields, which means that the spreads on US / European bond yields have not moved as much. It is not enough for forex traders to worry anyway.

Admittedly, Germany’s March GfK Consumer Confidence Survey released at 07: 00GMT Thursday morning was decent; The overall index beat expectations at -12.9 although it is still well below pre-pandemic levels, which is not really surprising as Germany wallows in the lockdown, with no hope of imminent relief without a significant drop in Covid-19 infection rates amid slow vaccine launch. Therefore, the data did not seem to change the dial of the euro at all. Also ignored were Italian consumer and business surveys, the European Commission for the euro zone (both generally strong), and US data (strong figures for weekly jobless claims and durable goods orders for January ).

Markets have been much more interested in central bank discourse than economic data in recent days. Remember that Fed Chairman Jerome Powell was very dovish in his semi-annual testimony to Congress and downplayed concerns that the economy could overheat, but did not show much concern about the recent surge in bond yields. Fed members James Bullard and Ester George spoke today and expressed a similar sentiment. The above appears to have been a negative dollar this week; A dovish Fed, willing to communicate that any tightening is still a long way off, does not bode well for the US dollar, and while the Fed is not concerned about raising rates for the time being, it does care to limit rates. rates up, you will have to modify or expand your QE program, which is a moderate move (and negative for the USD).

Looking ahead, influential FOMC member and New York Federal Reserve Chairman John Williams will speak at 8:00 PM GMT. Earlier in the week and in sync with other Fed members, Williams brushed off concerns about rising bond yields. However, keep in mind that since you last spoke, US 10-year yields are up an additional 13 basis points and are now approaching 1.50%. The focus then turns to preliminary February inflation figures for France and Spain during the European session on Friday, before moving on to the US core PCE (the Fed’s favorite inflation measure) ahead of the open. from USA

Technical Levels

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