EUR/USD defends US inflation-inspired gains near 1.0300 at one-month high
|- EUR/USD retreats from five-week high of 1.0368, remains steady of late.
- US CPI tamed hawkish Fed expectations by easing below market forecasts, prior in July.
- Fed’s Kashkari backed recession fears, Biden teases Sino-American tussles.
- US PPI, Jobless Claims can entertain traders, risk catalysts are the key.
EUR/USD flirts with the 1.0300 threshold, after posting the biggest daily gains to refresh a five-week high, as traders reassess the risk profile during early Thursday morning in Europe. The reduction in the US inflation numbers propelled hopes that the US Federal Reserve (Fed) could ease its rate hike trajectory. However, recession fears and the Sino-American tussles, as well as the Fedspeak appeared to have poked the pair buyers of late.
As per the latest US inflation data, the US Consumer Price Index (CPI), declined to 8.5% on YoY in July versus 8.7% expected and 9.1% prior. The Core CPI, which excludes volatile food and energy prices, stayed unchanged at 5.9% YoY, compared to the market consensus of 6.1%. On the other hand, Germany’s final readings of Harmonized Index of Consumer Prices (HICP) inflation gauge for July confirmed 8.5% YoY readings.
Following the US inflation release, US President Joe Biden said on Wednesday that they are seeing some signs that inflation may be moderating, as reported by Reuters. "We could face additional headwinds in the months ahead," Biden added. "We still have work to do but we're on track," adds US President Biden.
It’s worth noting, however, that Minneapolis Fed President Neel Kashkari recently said that the Fed is "far, far away from declaring victory" on inflation. The policymaker also added that he hasn't "seen anything that changes" the need to raise the Fed's policy rate to 3.9% by year-end and to 4.4% by the end of 2023. Elsewhere, Chicago Fed President Charles Evans mentioned, “The economy is almost surely a little more fragile, but would take something adverse to trigger a recession.” Fed’s Evans also called inflation "unacceptably" high.
Elsewhere, the news that US President Biden rethinks steps on China tariffs in wake of Taiwan response, per Reuters, also seemed to have probed the pair buyers.
Amid these plays, Wall Street rallied but the US Treasury yields remained mostly unchanged by ending the day at around 2.776%.
Moving on, the weekly readings of the US Jobless Claims and the monthly Producer Price Index (PPI) for July could entertain the EUR/USD traders. However, major attention should be given to the qualitative factors in the wake of recent risk-negative headlines.
Technical analysis
Despite the latest run-up EUR/USD remains below the downward sloping trend line from late March, around 1.0320, as well as the key resistance area near 1.0345-60, including the 50-DMA and lows marked in May and June. However, a late July high near 1.0280 restricts the short-term downside of the major currency pair.
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