- EUR/USD reaches new multi-week highs past 1.0700.
- The dollar remains on the back footing amidst increasing risk-on trade.
- ECB’s Lagarde sees rates in the positive territory in Q3.
Further optimism among traders pushes EUR/USD to new 4-week highs in the 1.0735/40 band on Tuesday.
EUR/USD boosted by sentiment, Lagarde
EUR/USD extends Monday’s advance to the area well north of 1.0700 the figure on turnaround Tuesday, once again sustained by the strong improvement in the risk-linked galaxy as well as further hawkish comments from Chairwoman Lagarde.
On the latter, Lagarde insisted that rates could be in the positive territory in Q3 and she discarded a recession scenario in the euro bloc for the time being.
Extra legs to the single currency came after the flash Manufacturing PMI surpassed estimates in Germany and is now seen at 54.7 in May. Results from France and the broader Euroland, instead, were short of expectations at 54.5 and 54.4, respectively.
The US docket will include the advanced Manufacturing/Services PMIs for the month of May as well as New Home Sales and welcoming notes from Chief Powell at an event in Las Vegas
What to look for around EUR
Extra recovery in EUR/USD trespasses the 1.0700 mark on Tuesday, recording at the same time new multi-week highs.
Despite the pair’s current upside impulse, the broader outlook for the single currency remains in the negative territory for the time being. As usual, price action in spot should reflect dollar dynamics, geopolitical concerns and the Fed-ECB divergence.
Occasional pockets of strength in the single currency, however, should appear reinforced by speculation the ECB could raise rates at some point in the summer, while higher German yields, elevated inflation and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.
Key events in the euro area this week: Flash EMU, Germany PMIs, ECB Lagarde (Tuesday) – Germany Final Q1 GDP, GfK Consumer Confidence, ECB Lagarde (Wednesday).
Eminent issues on the back boiler: Speculation of the start of the hiking cycle by the ECB as soon as this summer. Asymmetric economic recovery post-pandemic in the euro area. Impact of the war in Ukraine on the region’s growth prospects.
EUR/USD levels to watch
So far, spot is up 0.22 at 1.0711 and faces the next hurdle at 1.0736 (monthly high May 24) followed by 1.0789 (55-day SMA) and finally 1.0936 (weekly high April 21). On the downside, a breach of 1.0348 (2022 low May 13) would target 1.0340 (2017 low January 3 2017) en route to 1.0300 (round level).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD retreats to 1.0750, eyes on Fedspeak
EUR/USD stays under modest bearish pressure and trades at around 1.0750 on Wednesday. Hawkish comments from Fed officials help the US Dollar stay resilient and don't allow the pair to stage a rebound.
GBP/USD struggles to hold above 1.2500 ahead of Thursday's BoE event
GBP/USD stays on the back foot and trades in negative territory below 1.2500 after losing nearly 0.5% on Tuesday. The renewed US Dollar strength on hawkish Fed comments weighs on the pair as market focus shifts to the BoE's policy announcements on Thursday.
Gold fluctuates in narrow range above $2,300
Gold struggles to make a decisive move in either direction and moves sideways in a narrow channel above $2,300. The benchmark 10-year US Treasury bond yield clings to modest gains near 4.5% and limits XAU/USD's upside.
SEC vs. Ripple lawsuit sees redacted filing go public, XRP dips to $0.51
Ripple (XRP) dipped to $0.51 low on Wednesday, erasing its gains from earlier this week. The Securities and Exchange Commission (SEC) filing is now public, in its redacted version.
Softer growth, cooler inflation and rate cuts remain on the horizon
Economic growth in the US appears to be in solid shape. Although real GDP growth came in well below consensus expectations, the headline miss was mostly the result of larger-than-anticipated drags from trade and inventories.