- EUR/USD lost its traction after rising above 1.2200.
- US Dollar Index rose into the positive above 90.00.
- Focus shift to ECB policy announcements, US inflation data.
The EUR/USD pair climbed to a fresh weekly high of 1.2219 in the early trading hours of the American session on Wednesday but reversed its direction. As of writing, the pair was virtually unchanged on a daily basis at 1.2174.
DXY erases daily losses on recovering bond yields
In the absence of significant fundamental drivers, the USD's market valuation continues to drive EUR/USD's movements. Earlier in the day, the sharp drop witnessed in the US Treasury bond yields weighed on the greenback and caused the US Dollar Index (DXY) to drop to a daily low of 89.83. With the benchmark 10-year US T-bond yield pulling away from the monthly low it set at 1.471%, the DXY staged a rebound and turned flat on the day above 90.10.
On Thursday, the European Central Bank (ECB) will announce its policy decisions. Previewing this event, "the ECB’s latest announcement – that purchases under the Pandemic Emergency Purchase Programme (PEPP) over the next quarter will be conducted at a significantly higher pace than during the first months of this year – reinforces our view that it will remain highly accommodative for longer," said Lee Sue Ann, Economist at UOB Group.
Meanwhile, Reuters reported on Wednesday that ECB policymakers will hold a three-day meeting that will start on June 18 in Frankfurt to discuss the strategy review.
On the other hand, the Consumer Price Index (CPI) data from the US on Thursday will be watched closely by market participants.
Technical levels to watch for
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