English
Prior to EU/US PMIs, EUR/USD Pares Its Largest Daily Drop in Three Weeks to about 1.0650
EUR/USD receives bids to reestablish intraday high and reverses retreat from six-month high. ECB-inspired surge competes with safe-haven demand for the US dollar. Before the release of December's preliminary PMIs, sluggish markets permit traders to reduce recent market movements.
EUR/USD shows modest advances near 1.0640 as it retests the intraday high early on Friday. In doing so, the main currency pair consolidates the largest daily decline in three weeks while reversing the previous day's retreat from the greatest levels in six months prior to the release of significant European and American economic data.
The European Central Bank's (ECB) aggressive rate hike of 0.50% pushed the EUR/USD pair to a new multi-day high of 1.0736 on Thursday evening. However, fears of recession supported the US Dollar's safe-haven demand and subsequently submerged the quote.
In spite of this, the ECB met market expectations when announcing the 50 basis point (bps) rate increase. However, President Christine Lagarde's remarks supported the positive attitude, as she stated, "Information predicts 50 basis points next meeting, possibly next meeting as well, and thereafter." In addition, the ECB declared its intention to halt the Asset Purchase Program (APP) through gradual Quantitative Tightening (QT).
It should be emphasized that the generally hawkish rate announcements from the major central banks joined the fears of increasing inflation and the energy crisis to accentuate recession concerns, allowing the US Dollar to celebrate its safe-haven status amid contradictory data.
In November, US Retail Sales came in at -0.6% MoM versus 0.1% projected and 1.3% previously. In addition, manufacturing survey results from the Philadelphia Fed and the New York Fed were dismal for the month in question, while Industrial Production slowed in November and Jobless Claims fell for the week ending December 9.
In response to these moves, Wall Street benchmarks declined and US Treasury bond yields rose, allowing the US Dollar Index (DXY) to post its largest daily gains in 10 weeks. As of late, S&P 500 Futures and US Treasury bond yields have been stagnant as traders await the first readings of December activity data for Germany, the Euro Area, and the United States. The final readings of Eurozone inflation data will also be crucial to monitor.
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