EUR/USD drops towards 1.1300 on sudden risk-off mood, Fed, ECB speakers eyed
|- EUR/USD takes offers to snap two-day rebound on news that Ukraine violated ceasefire.
- ECB policymakers have recently been hawkish, FOMC refrained to back 0.5% rate hike in March.
- Strong US data pressures Fed, yields drop but DXY regains upside momentum on fresh risk-aversion wave.
- Comments from central bankers, ECB Economic Bulletin and second-tier data decorate calendar.
EUR/USD extends pullback from the weekly top, pressured around intraday low near 1.1330 as the USD cheers a surprise swing to risk-aversion during early Thursday morning in Europe.
That said, the US Dollar Index (DXY) suddenly reversed from a three-day downtrend to post the heavy daily gains around 96.00 after Sputnik reports suggest Ukraine violated ceasefire on four LPR localities. The markets previously cheered the roll-back of Russian military forces from the border before the West, Ukraine and Estonian updates raised doubts over Moscow’s moves.
While portraying the mood, stock futures print losses and the US Treasury yields drop whereas the traditional safe-havens like gold benefit from the rush to risk-safety.
Previously, the Federal Open Market Committee (FOMC) Minutes showed hawkish concerns among the board members but marked no strong support for a 0.50% rate hike in March, which may be due to the pre-inflation analysis. “Federal Reserve officials agreed last month that it was time to tighten monetary policy, but also that decisions would depend on a meeting-by-meeting analysis of data, according to minutes of the most recent policy meeting,” reported Reuters.
On the other hand, European Central Bank Governing Council member and Latvian Central Bank Governor Martins Kazaks said on Wednesday that an interest rate hike this year is "quite likely". The policymaker, however, recommends a careful, phased policy adjustment and said that money market bets, which attribute some possibility to a first ECB rate hike by the end of H1 2022, are somewhat too harsh.
It’s worth noting that the recent positive rhetoric from the ECB policymakers will be on test today by the ECB Economic Bulletin, published eight times in a year. Also important will be comments from ECB Chief Economist Philip Lane.
Talking about the US data, Retail Sales and Industrial Production rose notably beyond the market forecasts and previous readouts with the latest MoM figures of 3.8% and 1.4% respectively in January. The same raises prospects of the Fed’s rate-hike and also highlights the latest disappointment over the policymakers’ refrain to act.
Moving on, the second-tier US economics, mainly the housing market numbers, jobless claims and Philadelphia Fed Manufacturing Survey, will decorate the calendar. However, major attention will be given to Fedspeak and updates from G20, not to forget Russia-Ukraine news, for clear direction.
Technical analysis
Unless breaking convergence of the 21-DMA and 50-DMA, around 1.1330, the EUR/USD prices may aim for the 100-DMA level of 1.1400. However, the further upside becomes difficult until crossing the 1.1485, comprising a five-week-old horizontal area.
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