EURUSD drops marginally but holds parity ahead of US Midterm elections

The EURUSD pair has witnessed a mild correction after testing Monday’s high at 1.0031 in the Tokyo session. Exhaustion in the upside momentum has resulted in a minor selling interest in the asset, however, the asset still holds the parity as the overall risk impulse is still positive.

Meanwhile, the US dollar index has bounced back sharply from 110.05 as investors are turning cautious ahead of the US mid-term elections. S&P500 futures are displaying a flat-to-positive move in Tokyo after a bullish Monday amid optimism in the entire market.

On the contrary, the 10-year US Treasury yields have climbed to 4.22% after hawkish commentary from Richmond Federal Reserve (Fed) President Thomas Barkin. The Fed policymaker believes that the US central bank's steady pace of policy tightening will continue until there are signs of a slowdown in the inflationary pressures. He added, “It would have made sense for the Fed to start tightening earlier.”

The outcome of the US mid-term elections will significantly impact the mighty DXY and display the extent of political stability in the economy. Therefore, the contest between 435 seats of the House of Representatives and 34 seats of the Senate will be keenly watched.

Later this week, the release of the US inflation will remain in focus. Due to accelerating interest rates and a fall in gasoline prices, the inflationary pressures are expected to display slippages.

On the Eurozone front, investors are awaiting the Retail Sales data. The economic data may remain negative at -1.3% but will improve against the prior figure of -2.0%. Despite soaring price pressures, lower retail sales indicate an extreme weakness in retail demand.