EUR/USD Stabilises Below 1.0900 As Fed Conservatives And Us Data Supplant ECB Optimists, and EU/US Inflation Indicators Are Scrutinised

The EUR/USD is trading near the weekly low around 1.0860 as bears attack the monthly support line in the early hours of Friday morning in Asia. In doing so, the Euro/U.S. dollar combination demonstrates the typical pre-data anxiety as the Eurozone and U.S. inflation data of the highest calibre approach. Also supporting the main currency pair could be the market's risk-taking disposition.

The previous day, EUR/USD declined the most in a week to retest the weekly low after US data showed mostly positive outcomes but the European counterpart was mixed. In addition, the Euro pair is negatively impacted by the relatively more hawkish Federal Reserve (Fed) signals compared to the market's rejection of the European Central Bank's (ECB) policymakers' optimism.

In June, Eurozone Consumer Confidence matched the market's forecast of -16.1 and the previous reading of -16.1, while Business Climate decreased to 0.06 from 0.19 the previous month. In addition, the Economic Sentiment Indicator for the bloc decreased to 95.3% in June, compared to previous estimates of 96.0 and 96.5. In addition, Industrial Confidence on the former continent declined, while Service Sentiment exceeded expectations for the month in question.

However, according to the Consumer Price Index (CPI), annual inflation in Germany increased to 6.4% in June from 6.1% in May and 6.3% expected. In a similar vein, the European Central Bank's (ECB) preferred inflation indicator, the Harmonised Index of Consumer Prices (HICP), rose to 6.8% annually from 6.3% previously and 6.7% market expectations.

Elsewhere, European Central Bank (ECB) policymaker and Bank of Spain Governor Pablo Hernandez de Cos stated on Thursday that the ECB's September meeting regarding interest rates is entirely open. Earlier in the week, a number of ECB policymakers, including President Christine Lagarde, advocated for higher rates at the ECB Forum, with the majority indicating that a rate increase in July is likely.

Notably, the ECB's Economic Bulletin stated, "Overall, it appears that changes in price competitiveness since the pandemic have neither exacerbated nor further reduced external imbalances."

In contrast, the US Gross Domestic Product (GDP) Annualised, also known as the Real GDP, grew at a rate of 2.0% for the first quarter (Q1) of 2023, compared to the initial estimate of 1.3% growth. In addition, the US Weekly Initial Jobless Claims decreased to 239K for the week ending June 23, compared to the expected and revised figure of 265K. However, the Personal Consumption Expenditure (PCE) Price for Q1 2023 decreased to 4.1% QoQ from 4.2% expected and prior, and Pending Home Sales for May fell to -2.7% MoM from 0.2% expected and -0.4% prior (revised).

In addition, Fed Chair Jerome Powell stated at the Fourth Conference on Financial Stability hosted by the Bank of Spain in Madrid, "A large majority of Fed policymakers anticipate two or more rate hikes by the end of the year." In addition, the president of the Federal Reserve Bank of Atlanta, Raphael Bostic, told reporters regarding prospective rate increases that he does not see the same sense of urgency as others, including Chairman Jerome Powell. Recently, however, the policymaker made a U-turn, stating, "I believe it's clear that inflation has significantly declined."

Wall Street closed with a gain, but 10-year and 2-year US Treasury bond yields also rose, and the US Dollar Index (DXY) reached a new weekly high before falling to 103.40.

The first Eurozone HICP and Consumer Price Index (CPI) inflation readings for June will precede the US Core PCE Price Index for May, providing EUR/USD pair traders with a source of entertainment. While the market forecasts for the scheduled data don't flash any alarming signals, negative US inflation figures and a surprise positive in Eurozone data may cause the main currency pair to rebound from the short-term key support.