EUR/USD aims stability above 1.1000 as mixed Eurozone CPI supports mega rate hike from ECB
- EUR/USD is looking for shifting its auction above 1.1000 as USD Index has failed to sustain above 102.00.
- The risk profile is quite negative ahead of Fed policy and rising concerns over the debt ceiling.
- A continuation of the 50bp interest rate hike announcement is anticipated from ECB as Eurozone inflation is severely persistent.
The EUR/USD pair has climbed above the psychological resistance of 1.1000 in the early Asian session. The major currency pair is aiming to sustain confidently above 1.1000 as the US Dollar Index (DXY) has sensed immense selling pressure after failing to shift above the two-week-old resistance of 102.20.
S&P500 was heavily dumped by the market participants ahead of the monetary policy from the Federal Reserve (Fed) and fears of default by the United States administration as the debt ceiling has not been raised yet. Market sentiment is negative as more rate hikes from the Fed will deepen fears of a recession in the US economy.
The demand for US government bonds rose sharply as US Treasury stated that they won’t be able to make payments if the debt ceiling does not get raised after June 01. The yields offered on 10-year US Treasury bonds dropped sharply to near 3.43%.
The USD Index has slipped sharply below 102.00 and is expected to remain on tenterhooks as Fed chair Jerome Powell will provide a further roadmap for arresting stubborn inflation. Neutral guidance is anticipated from the Fed as US labor market conditions seem losing strength. On Monday, Morgan Stanley announced a planned lay-off of 3K more jobs as deals have slumped. Also, March JOLTs Job Openings data dropped sharply to 9.59M from the consensus of 9.775M.
On the Eurozone front, mixed inflation data supports a bumper interest rate hike from the European Central Bank (ECB). Preliminary headline inflation surprisingly jumps to 7.0% from the consensus of 6.9% while core inflation softened marginally to 5.6% vs. the estimates of 5.7%. A continuation of a 50 basis point (bp) interest rate hike announcement is anticipated from ECB President Christine Lagarde as inflation is severely persistent.