EUR/USD bulls attack 1.0800 amid risk-on mood, focus on ECB’s Lagarde, US Consumer Confidence

• EUR/USD picks up bids to extend week-start rebound amid downbeat US Dollar, firmer sentiment.
• Receding fears of banking fallouts allow markets to take a breather from the previous risk aversion.
• Upbeat German data, hawkish ECB talks add strength to the Euro pair.
• ECB President Lagarde’s speech, US CB Consumer Confidence eyed for fresh impulse.

EUR/USD extends the week-start recovery to 1.0800 during early Asian session on Tuesday, picking up bids to refresh the intraday high of late, as the risk-on mood joins the hawkish comments from the European Central Bank (ECB) officials. Adding strength to the Euro pair’s run-up are the firmer data from Germany, Europe’s powerhouse, as well as the recent comments from the Federal Reserve (Fed) Governor.

Market sentiment improved as the European and the US authorities announced the extension of emergency lending to banks. Adding strength to the optimism were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

That said, the upbeat prints of Germany’s IFO data for March also favored the EUR/USD bulls. On Monday, Germany’s IFO Business Climate Index rose to a 13-month high of 93.3 for March versus 90.9 market forecasts and 91.1 prior. Further, the IFO’s gauges of Current Assessment and Expectations also increased to 95.4 and 91.2 in that order during the said month compared to respective expected figures of 94.1 and 88.0, versus 93.9 and 88.4 previous readings.

Further, hawkish ECB talks were also part of the bullish ammunition for the pair. ECB policymaker, Pablo Hernandez de Cos, said on Monday, “Future monetary policy decisions will depend on three factors, such as new economic and financial data and core inflation.” The policymaker also said that tensions in financial markets have generated a further tightening of financial conditions, affecting the outlook for economic activity and inflation. On the same line, ECB Governing Council member Gediminas Šimkus said that the bank liquidity and capitalization are high in the euro area while also adding, “Financial stability is an important factor.”

It’s worth noting that Governing Council member Isabel Schnabel said on Monday that they have no real concern about financial stability risks but added that the situation is still fragile. Additionally, ECB policymaker Mario Centeno said that the wage increase in the Eurozone is still compatible with the monetary policy and added that they are not observing and second round effect on wage-setting.

Also positive was S&P Global’s announcement on Monday that it revised the 2023 Gross Domestic Product (GDP) growth forecast for Eurozone to 0.3% from 0% previously. However, S&P Global also anticipates Eurozone GDP to grow by 1% in 2024, down from 1.4% expected in the previous forecast.

On the other hand, the latest comments from Federal Reserve Governor Philip Jefferson and the US Dollar’s safe-haven demand could be linked to the EUR/USD run-up, not to forget downbeat US data. “Inflation ‘has started to come down’ with some of that due to tighter monetary policy and some due to other factors such as improving global supply chains,” said Fed’s Jefferson. Also, the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

While portraying the risk appetite, Wall Street closed mixed, losing some of the intraday gains in the late hours, whereas yields rebound after a four-week downtrend.

Looking ahead, EUR/USD pair traders should keep their eyes on ECB President Christine Lagarde’s speech and the US Conference Board’s (CB) Consumer Confidence for clear directions. That said, bulls will be more interested in seeking a further normalization of the banking sector, as well as inflation run-up in the bloc, not to forget softer US data.

Technical analysis

A clear bounce off the 50-DMA, around 1.0735 by the press time, directs EUR/USD towards the 1.0930 horizontal resistance.