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EUR/USD Approaches a Weekly Low But Maintains Its Position Above The Mid-1.0600s In Advance Of The ECB's Lagarde
EUR/USD struggles near the lower limit of its weekly range as the US dollar gains strength. A hawkish risk aversion and hawkish remarks by Fed officials support the safe-haven dollar. As well as acting as a headwind for the pair, the ECB's next policy move is accompanied by ambiguous signals.
Presently situated just above the mid-1.0600s, the EUR/USD pair remains depressed throughout the Asian session on Friday. It is situated near the lower end of its weekly range.
A key factor weighing on the EUR/USD pair, the US Dollar (USD) is currently elevated near a one-week high that was reached on Thursday in response to hawkish remarks by several FOMC members, including Federal Reserve (Fed) Chair Jerome Powell. Fed officials stated that they remain uncertain as to whether current interest rates are sufficient to end the fight against inflation. Powell, meanwhile, stated at an event hosted by the International Monetary Fund that while the deceleration of inflation has encouraged policymakers, they remain uncertain as to whether the current restrictive monetary policy measures are adequate to sustain the positive trend.
The remarks reignited wagers on the US central bank raising interest rates by a minimum of one more basis. This, coupled with a lacklustre auction of 30-year Treasury bonds, resulted in increased yields for bonds of all maturities and further weakened the value of the dollar. This, coupled with apprehensions regarding the deteriorating economic climate in China, the second-largest economy globally, reduces the appetite of investors for speculative assets. The overnight decline in US equities, precipitated by the anti-risk flow, is regarded as an additional factor bolstering the dollar's relative safe-haven status and limiting the EUR/USD pair's upside.
In contrast, amid ambiguous indications regarding the European Central Bank's (ECB) forthcoming policy course, the shared currency has encountered considerable difficulty in attracting substantial purchasers. Indeed, current market pricing suggests a 30% probability of a reduction in March. Thursday, however, Vice President Luis de Guindos stated that the time had not yet come to initiate discussions regarding a reduction in ECB interest rates. This may discourage traders from placing bullish wagers on the Euro, indicating that the EUR/USD pair has a downward path of least resistance and any corrective rebound is likely to be sold into.
As no market-moving economic data is scheduled to be released from the Eurozone on Friday, attention will be directed towards the appearance of ECB President Christine Lagarde at an event in London. In contrast, the Michigan Consumer Sentiment Index is scheduled for release later during the North American session on the US economic agenda. Aside from this, the dynamics of the USD price could be influenced by US bond yields and broader risk sentiment; consequently, this could generate short-term trading opportunities near the EUR/USD pair.
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