EURUSD saw some drop buying, but there was little positive conviction.
The EURUSD pair recovers from an intraday slump to about 1.0800 and reaches a new daily high during the early European session on Monday. Officials at the European Central Bank (ECB) have become increasingly vocal about the need for greater evidence that inflation is returning to the 2% objective before cutting borrowing costs. This, together with an increase in the German Ifo Business Climate, is seen as a tailwind for the shared currency and the currency pair amid a restrained US dollar. (USD) price action.
The imminent recession risk in Germany prevents bulls from putting new wagers.
However, concerns about a coming recession in Germany . The Eurozone’s largest economy may prevent bullish traders from placing aggressive wagers on the EURUSD pair. Furthermore, rising consensus that the Federal Reserve (Fed) would keep interest rates higher for an extended period of time may support the US dollar and contribute to the major’s gains being limited. Investors may also want to remain on the sidelines until this week’s release of the Eurozone’s flash consumer inflation statistics and the US Core PCE Price Index.
Daily Market movers: Draws strength from delayed ECB rate cut bets and restrained USD price activity.
Policymakers at the European Central Bank continue to fight back against expectations of early interest rate cuts, which supports the EURUSD pair.
ECB’s Robert Holzmann stated on Friday that the largest danger to rate cuts is the Red Sea conflict, and that it is preferable to decrease interest rates later rather than too early.
Furthermore, ECB executive board member Isabel Schnabel stated that monetary policy has had a lower effect on damping demand for services.
Furthermore, ECB policymaker and Bundesbank Chief Joachim Nagel stated that it is premature to decrease interest rates because the pricing outlook is not yet clear enough.
Separately, ECB President Christine Lagarde stated that bargaining rounds in the first quarter will be critical for the next interest rate decisions.
US bond yields are falling, which weakens the dollar and supports the major.
Falling US Treasury note yields fail to help the US Dollar build on last week’s comeback from its lowest level since early February and provides additional support.
The FOMC meeting minutes, combined with hawkish remarks from numerous Federal Reserve officials, confirmed predictions that the US central bank will maintain interest rates higher for longer.
In its most recent monthly report, the Bundesbank warned that the German economy is most certainly in recession, which might limit the currency pair’s potential for further gains.
