- The euro rises against a weaker dollar and is back at 1.1580.
- The dollar retreats as the yield curve on US bonds flattens.
- EUR / USD is still negative, heading towards 1.1000 – Credit Suisse.
The euro is taking advantage of a somewhat weaker dollar on Wednesday to regain lost ground. The pair EUR/USD it has bottomed out at year-to-date lows at 1.1525 to appreciate around 0.4% on the day, reaching session highs near 1.1580 so far.
The dollar loses ground as the US yield curve flattens out.
The dollar is trading lower against its major peers on Wednesday, weighed down by a flattening of the yield curve on US bonds. Yields on the 10-year Treasury fell to 1.57% from levels above 1.6% on Tuesday, while short-term yields are on the rise. The yield on the 2-year Treasury bond has risen to 0.35%, its highest level in 18 months.
In the macroeconomic calendar, the United States Consumer Prices have confirmed the inflationary trend observed during the previous months. Consumer inflation accelerated to a 0.4% pace in September, from 0.3% the previous month, while annual inflation increased 5.4%, from 5.3% in August.
These figures cast doubt on Fed Powell’s theory of “temporary” high inflationary pressures, adding pressure on the US central bank to announce a gradual reduction in QE in November.
EUR / USD remains bearish, targeting 1.1000 – Credit Suisse
However, Credit Suisse’s currency analysis team regards the current recovery of the euro as a mere correction. On a bigger picture, the pair is still heading lower: “EUR / USD is probing the weekly Ichimoku cloud and is close to the March 2020 high at 1.1495. Defending this may result in a rebound, however, 1.1665 could limit (…) Below 1.1495, the next support could be at 1.1450 and projections of 1.1380 (…) “While we would expect a new hold at 1.1290, we continue to see risks broader biases to the downside, with support seen below at 1.1020 / 00 “.