EUR/USD dips back below 1.1300 as key US data releases eyed later in the week

EUR/USD has been trading with a slightly negative bias and recently swung back to the south of the 1.1300 level, where it currently trades lower by about 0.2% on the day. Risk appetite has improved on Monday amid better news on the Covid-19 front and following a surprise PBoC 50bps RRR cut. This is helping underpin Fed tightening expectations and thus supporting the US dollar versus low yields currencies like the euro; December 2022 three-month eurodollar futures have moved a few bps higher to price an FFR of above 1.0% again (implying at least three 25bps rate hikes are expected in 2022).

Eurozone data released on Monday morning is likely not helping the euro’s cause. German Factory Orders saw a massive 6.9% MoM decline versus expectations for a much more modest decline of 0.5%. Economists framed the data as not as bad as it seemed, however, as it pointed to an uptick in actual production in the months ahead. Elsewhere, Eurozone Sentix Investor Confidence took a bigger knock than expected in December, dropping to 13.5 from 18.3 last month, its lowest level since April.

Trading conditions for the remainder of the session are likely to be subdued amid a lack of notable calendar events on either side of the Atlantic. The second estimate of Eurozone jobs and GDP data for Q3 will be out on Tuesday but is unlikely to prove market moving. Rhetoric from ECB members including President Christine Lagarde, Vice President Luis de Guindos and Executive Board member Isabel Schnabel on Wednesday and Friday will likely prove more interesting amid uncertainty about what the ECB will decide on in December. The most interesting US data will be October JOLTs job opening on Wednesday, weekly jobless claims on Thursday and November Consumer Price Inflation and preliminary December University of Michigan Consumer Sentiment data on Friday.