- Bearish EUR / USD gains the upper hand, loses its bullish momentum.
- The pair can find an impulse of Eurozone CPI data.
- The euro hit its lowest level in 16 months after the ECB chief’s conciliatory comments.
EUR / USD has renewed its vow and continues to slide in Wednesday’s first Asian session, trading around the annual lows of 1.1300. The pair expects the European Central Bank (ECB) to stick to its short-term accommodative policy parameters amid an economic slowdown.
The cross currency pair is at its lowest since July of last year. European Central Bank President Christine Lagarde said tightening monetary policy to curb inflation could stifle the eurozone’s recovery. She further reiterated that the factors pushing prices up would fade next year, increasing the contrast to hawkish hints from other central banks.
In addition, Scotiabank expects “the widening Bunds-UST differentials to remain a downward force on the euro. The gap between US and German debt in the space of 10 years has reached its highest level since April as markets adjust to the downside and possible Fed hikes. “
US T bond yields remain strong ahead of the Fed’s daily speech. Meanwhile, the greenback continued its strength, reaching new highs in 2021, hitting the common currency even more. US retail data and industrial activity beat expectations, signaling the strength of the US economy, further pushing the Federal Reserve to hike rates earlier. The US dollar has now weakened investor appetite, leaving EUR / USD vulnerable to a much needed catalyst to show direction. To add even more pressure, US President Joe Biden officially signed a bipartisan $ 1,000 billion infrastructure bill backing up the dollar.
Looking ahead, investors will be attentive to the ECB’s financial stability review and the release of Eurostat consumer price index data. The speech of Isabel Schnabel, member of the ECB, could give some insight.