EUR/USD retraces its recent losses ahead of the German PPI, improves to near 1.0890
|- EUR/USD could face a challenge on the sentiment toward early rate cuts by the ECB.
- ECB President Christine Lagarde expects interest rate cuts might be considered by the summer.
- Upbeat US Treasury yields could reinforce the strength of the US Dollar.
EUR/USD moves upward, recovering its recent losses registered in the previous session. The EUR/USD pair trades higher around 1.0890 during the Asian trading hours on Friday. However, the Euro (EUR) could confront a challenge arising from speculations regarding potential rate cuts by the European Central Bank (ECB) in September. The prevailing sentiment was boosted when ECB President Christine Lagarde, speaking at the World Economic Forum (WEF) in Davos, suggested that interest rate cuts might be considered by the summer.
President Lagarde highlighted the possibility that the ECB's interest rates have peaked and underscored the central bank's reliance on economic data. She acknowledged the presence of ongoing uncertainties and indicators that are still not firmly anchored, contributing to the nuanced stance on future monetary policy.
The US Dollar Index (DXY) remains steady after recent gains with a positive bias to continue its winning streak. The upward movement in US Treasury yields could provide support to underpinning the US Dollar. The 2-year and 10-year yields on US bond coupons stand at 4.36% and 4.16%, respectively, at the time of writing. On Thursday, US hot figures provided further impetus to the upward bias in the US Dollar, undermining the early interest rate cuts by the US Federal Reserve (Fed) in March.
US Housing Starts (MoM) outperformed expectations in December, reaching 1.46 million compared to the anticipated 1.426 million. Building Permits for the month also exhibited growth, climbing to 1.495 million and surpassing the market consensus of 1.48 million. Furthermore, Initial Jobless Claims for the week ending on January 12 decreased to 187,000 from the previous reading of 203,000.
Traders are anticipated to closely monitor the Germany's Producer Price Index (PPI) data on Friday. Conversely, attention will be directed towards the US preliminary Michigan Consumer Sentiment Index for January, expecting an improvement to a reading of 70 from December's figure of 69.7 for additional market insights.
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