- EURUSD struggles after reversing from two-month high, retreats of late.
- Mixed headlines surrounding key risk catalysts, mostly dovish Fedspeak keep buyers hopeful.
- US inflation expectations drop but those from Eurozone stay firmer of late.
- Bulls can cheer a likely softer US CPI for October if ECB Bulletin paint recession fears with a lighter shade.
EURUSD aptly portrays the market’s anxiety ahead of the key US inflation data during early Thursday. In doing so, the major currency pair fades the late Wednesday’s corrective bounce off 0.9992. It’s worth noting that the quote reversed from a two-month high the previous day amid a broad risk-off mood.
That said, the quote’s latest retreat could be linked to the comments from Minneapolis Federal Reserve (Fed) President Neel Kashkari as he said, per Reuters, “We will do what we need to do to bring inflation back down.”
Though, the previous Fedspeak has been dovish and challenged the US dollar buyers as New York Federal Reserve (Fed) President John Williams previously mentioned that the relatively stable long-term inflation expectations are good news. On the same line, Richmond Fed President Thomas Barkin also mentioned that the Fed’s fight against inflation may lead to a downturn in the US economy but that is a risk that the Fed will have to take.
Downbeat US inflation expectations, as per the 5-year and 10-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, weigh on the US dollar.
On the contrary, the latest European Central Bank (ECB) survey of consumer expectations for inflation stated, “After HICP inflation rose above 2% in July 2021, consumers’ inflation perceptions and expectations started to move upwards too.”
Headlines surrounding Russia also seemed to have favored the latest cautious optimism and probe the EURUSD bears as Russia appears to retreat from the only Ukrainian regional capital captured, namely Kherson. Furthermore, President Vladimir Putin is less likely to attend the upcoming G-20 summit in Bali, starting on November 15. Additionally, a slight reduction in China’s daily covid numbers, from 1,294 to 1,133 in Mainland, joins the receding hopes of Democrats to gain major power share in the US midterm elections to help favor the optimists.
Amid these plays, S&P 500 Futures print 0.20% intraday gains near 3,765, after dropping the most in a week, whereas the US 10-year Treasury yields pause the two-day downtrend near 4.10% at the latest. That said, the Wall Street benchmarks snapped a three-day uptrend the previous day amid fears of US government gridlock, as well as China’s covid woes.
Looking forward, the European Central Bank’s (ECB) monthly Economic Bulletin will be the first catalyst the EURUSD traders should watch amid impending fears of economic slowdown and the policymakers’ readiness for higher rates, as well as the Quantitative Tightening (QT). Following that, US Consumer Price Index (CPI) for October will be crucial as forecasts suggest that the headline CPI will ease to 8.0% YoY from 8.2% prior while the more important Core CPI may remain mostly unchanged near 6.5%, compared to 6.6% previous readings.
Also read: US October CPI Preview: US Dollar to weaken on a CPI-inspired risk rally
Technical analysis
Despite reversing from a two-month-old resistance line, around 1.0065 by the press time, EURUSD bears need validation from the early October swing high, at 0.9999, to tighten the grips.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays below 1.0800 after upbeat US data
EUR/USD stays under bearish pressure and trades slightly below 1.0800 in the American session on Thursday. The data from the US showed that the real GDP growth for the fourth quarter got revised higher to 3.4% from 3.2%, supporting the USD and weighing on the pair.
GBP/USD stays in daily range above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth helps the USD stay resilient against its rivals and limits the pair's upside.
Gold clings to strong daily gains above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays above 4.2% after upbeat US data and makes it difficult for XAU/USD to preserve its bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.