EUR/USD displays a rangebound structure around 0.9700 ahead of US Inflation
|- EUR/USD has turned sideways around 0.9700 as investors are laser-focused on US CPI data.
- Fed policymakers withstand restrictive policy measures despite slowing labor market.
- A hawkish commentary from ECB Lagarde failed to strengthen the shared currency bulls.
The EUR/USD displays a lackluster performance in the early Tokyo session as investors are laser-focused on the US Consumer Price Index (CPI) data. The asset oscillates around 0.9700 after a rebound from 0.9670 amid a conflicting risk-profile structure. The pullback move in S&P500 in early trade was whitewashed near settlement amid concerns over the release of the US inflation report.
Also, the US dollar index (DXY) was auctioned in a balanced profile chartered range of 113.06-113.60. The mighty DXY displayed a sideways performance despite the rising odds of a 75 basis point (bps) rate hike by the Federal Reserve (Fed). As per the CME FedWatch tool, 84.8% odds favour a fourth consecutive 75 bps rate hike by the Fed. Apart from that, the 10-year US Treasury yields are hovering around 3.9% after failing to cross the 4.0% hurdle.
The release of the Fed minutes on Wednesday has made it ‘loud and clear’ that bringing price stability is the foremost priority of the Fed. Despite the slowing labor market, officials are committed to standing with a ‘restrictive’ stance on interest rates. Most Fed policymakers believe that reaching the targeted terminal rate and sticking to it for an uncertain period is critical to contain the mounting price pressures.
Going forward, the US inflation data is the most important catalyst for a decisive move in the currency market. The headline US inflation may trim to 8.1%, per the expectations. While the core CPI that doesn’t consider oil and food prices may increase to 6.5%.
On the Eurozone front, hawkish commentary from European Central Bank (ECB) President Christine Lagarde has failed to strengthen the shared currency bulls. ECB policymaker stated that the Governing Council is having discussions on Quantitative Tightening (QE) and interest rate is the most appropriate tool in current circumstances.
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