- EUR/USD has recovered to the 1.0450 area on Tuesday, after briefly dipping below 1.0400 and testing yearly lows on Monday.
- The ECB’s aggressive rhetoric might be helping for now, but most traders will refrain from making big bets ahead of the Fed.
- The possibility of new flows of risk aversion means that the pair remains at risk of hitting new yearly lows.
After briefly dipping below 1.0400 on Monday and coming close to testing previous yearly lows in the 1.0350 area as the Dollar Index (DXY) hit new multi-year highs, the EUR/USD has recovered reasonably on Tuesday. The pair last traded at the 1.0450 area, up around 0.4% on the day, despite German ZEW survey data on economic sentiment for June coming in slightly softer than expected and published during the European morning.
The euro appears to be benefiting from the ECB’s statements, as Dutch central bank chief and ECB governing council member Klaas Knot has hinted at the possibility of the ECB raising interest rates by more than 25 basis points on next month “if conditions remain the same as today. Indeed, as markets have quickly priced in a further 25 basis point hike by the Fed this Wednesday, following last Friday’s good US inflation figures, there is no reason why they should not price in a hike. of 50 basis points by the ECB next month.
Turning to calendar events for the rest of the day, US Producer Price Inflation (PPI) data at 12:30GMT will be worthy of attention in the context of ongoing inflation concerns. persistently high. Meanwhile, influential ECB policy maker Isabel Schnabel’s speech at 17:00GMT on the issue of Eurozone fragmentation will be interesting in the context of the recent rise in the German-Italian yield spread. (which exceeds 250 basis points on Monday).
Ahead of this week’s key macroeconomic events, traders would do well not to chase any major moves in either direction. The prospect of risky assets falling again on central bank tightening fears, which tends to weigh on EUR/USD (because the dollar is considered a safe-haven currency), could push the pair to new yearly lows below 1.0350.
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
