EUR/USD Falls Below 1.1000 As US Dollar Yields Strengthen Amid a Disappointing Fed Bank Survey

EUR/USD maintains week-opening losses as Euro bears push for a 1.1000 round number, with intraday losses of 0.17% near 1.0990 during early Tuesday. In doing so, the major currency pair draws cues from the market's mixed sentiment, the US Dollar's rebound, and the Eurozone's recent data softening.

In spite of this, the US Dollar Index (DXY) extends its previous day's recovery amid higher yields and conflicting inflation and banking signals. The benchmark US 10-year Treasury bond yields have risen for three consecutive days to 3.51%, while US inflation expectations as measured by the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data surged to a one-week high the day before.

In addition, the Federal Reserve's (Fed) quarterly bank loan survey for the first quarter revealed stricter standards and weaker demand for commercial and industrial (C&I) loans to large and middle-market firms, as well as small firms.

In addition, unimpressive remarks by Chicago Federal Reserve Bank President Austan Goolsbee and US Treasury Secretary Janet Yellen's concerns of a US default weigh on the EUR/USD exchange rate, particularly in light of recent disappointing EU data.

On Monday, the German Industrial Production for March fell to -3.4% MoM, compared to -1.0% expected and 2.1% the month before. In addition, the Eurozone Sentix Investor Confidence dropped to -13.1 in May from -8.7 in April and -8.0 as predicted by the market.

Philip Lane, the chief economist of the European Central Bank, stated that there will be "a lot of disinflation" later this year, but that inflation still has "a lot of momentum." His remarks also impose downward pressure on the EUR/USD exchange rate amidst moderately bid S&P 500 futures.

In addition, a light calendar accentuates the importance of risk catalysts when forecasting EUR/USD movements.