- EUR/USD pushes further and clinches new multi-week highs.
- The greenback remains offered as risk-on mood persists.
- Germany Flash Inflation Rate next of relevance in the docket.
The European currency extends the optimism for another session and lifts EUR/USD to fresh 4-week highs in the vicinity of 1.1150 on Wednesday.
EUR/USD up on weaker dollar, looks to Ukraine
EUR/USD advances for the third consecutive session and trades in levels last seen in early March on the back of the persevering appetite for riskier assets and the investors’ exodus from the greenback.
Indeed, the selling pressure in the US dollar has been exacerbated in past hours following inspiring news from the geopolitical landscape which has lifted hopes of a potential diplomatic solution to the war in Ukraine. The timing, however, remains pretty vague.
The better mood in the pair is also reflected in the European money market, where the German 10y bund yields rose further and approach the 0.70% level for the first time since March 2018.
Extra gains in spot came after ECB Board member Muller hinted at the idea that the bond purchases might end in Q3, while a rate hike may follow. In the same line, his colleague Kazimir suggested that the bank could hike rates at some point by year end. In addition, President Lagarde reiterated that a probable end to the APP in Q3 remains data dependent.
In the domestic calendar, final figures saw the EMU Consumer Confidence at -18.7 and the Economic Sentiment at 108.5. Later in the session, all the attention will be on the release of the preliminary figures for the German inflation for the month of March. In the NA session, the final Q4 GDP and the monthly ADP report will take centre stage.
What to look for around EUR
EUR/USD extends recent gains and advances well north of the 1.1100 mark following renewed downside in the greenback. Pockets of strength in the single currency should appear reinforced by the speculation of the start of the hiking cycle by the ECB at some point by year end, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a rebound in the euro.
Key events in the euro area this week: EMU Final Consumer Confidence, ECB Lagarde, Germany Flash Inflation Rate (Wednesday) – Germany Retail Sales, Unemployment Change, Unemployment Rate, EMU Unemployment Rate (Thursday) – Final EMU, Germany Manufacturing PMI, EMU Flash Inflation Rate (Friday).
Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Impact of the geopolitical conflict in Ukraine.
EUR/USD levels to watch
So far, spot is gaining 0.61% at 1.1153 and faces the next up barrier at 1.1201 (55-day SMA) followed by 1.1251 (100-day SMA) and finally 1.1390 (weekly high February 21). On the other hand, a drop below 1.0944 (weekly low March 28) would target 1.0900 (weekly low March 14) en route to 1.0805 (2022 low March 7).
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