EUR/USD in multi-day highs past 1.1000 as European markets draw to a close

EUR/USD manages to reverse the initial pessimism and advances to fresh peaks past the psychological 1.1000 the figure in an auspicious beginning of the week.

EUR/USD stronger on USD-selling

EUR/USD clinches the third consecutive daily gain on the back of the continuation of the downward bias in the dollar and the generalized upbeat sentiment in the global markets.

Furthermore, the underlying uptrend that prevails in spot since mid-March remains propped up by expectations of further tightening by the ECB at its upcoming meetings. On this, a 25 bps rate hike appears already largely priced in in May, while speculation of extra raises at the June and July gatherings also remains on the rise.

In the data universe, Germany’s Business Climate tracked by the IFO institute came in below consensus despite improving marginally to 93.6 for the month of April. In the US, the Chicago Fed National Activity Index disappointed expectations after remaining unchanged at -0.19 in March. Later in the session, the Dallas Fed Manufacturing Index will close the daily docket.

What to look for around EUR

EUR/USD picks up pace and manages to clear the key hurdle at the 1.1000 yardstick at the beginning of the week.

Meanwhile, price action around the single currency should continue to closely follow dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.

Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: Germany IFO Business Climate (Monday) – Germany GfK Consumer Confidence (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment (Thursday) – Euro group Meeting, Germany labour market report/ Advanced Inflation Rate/Flash Q1 GDP Growth Rate, EMU Flash Q1 GDP Growth Rate (Friday).

Eminent issues on the back boiler: Continuation (or not) of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.29% at 1.1020 and a break above 1.1031 (weekly high April 24) would target 1.1075 (2023 high April 14) en route to 1.1184 (weekly high March 21 2022). On the downside, initial contention emerges at 1.0831 (monthly low April 10) seconded by 1.0788 (monthly low April 3) and finally 1.0766 (55-day SMA).