EURUSD rises for the fifth day in a row, reaching over a one-week high on Monday.
The EURUSD pair extends last week’s recovery move from the 1.0725-1.0720 area, its lowest level since November 14. And acquires positive traction for the first time on Monday. The momentum boosts spot prices to almost a one week peak. During the early portion of the European session. With bulls now trying to continue the momentum further Despite a slight drop in the US dollar (USD), it has risen beyond 1.0800.
The uncertainty surrounding Fed rate cuts keeps USD bulls on the defensive while supporting the EURUSD.
The uncertainty regarding the timing and speed of the Federal Reserve’s (Fed) interest rate. Decreases keeps USD bulls on the defensive, below a multi-month high reached last week. Aside from that, underlying positive sentiment in global equities markets is viewed as another element hurting the safe haven dollar.
However, rising consensus that the Fed will maintain interest rates higher for longer in the face of a still-resilient. US economy supports elevated US Treasury bond yields and should act as a tailwind for the Greenback.
ECB rate cut predictions may limit gains for the shared currency ahead of the US CPI report on Tuesday.
Furthermore, speculations that the European Central Bank (ECB) would begin. Decreasing interest rates at the start of the second quarter may assist. To cap the common currency and the EURUSD pair. This makes it important to wait for strong follow through buying before concluding. That spot prices have reached a near-term low. In the absence of any important macrodata on Monday. Statements by FOMC members may provide some impetus. But the focus remains on US consumer inflation readings, which are coming on Tuesday.
Daily Market Movers: Benefits from lower USD; ECB rate cut bets may constrain gains.
The uncertainty around the Federal Reserve rate decrease, combined with a positive risk tone, undermines the US Dollar and propels the EURUSD pair higher for the fifth day in a row, reaching over a one-week high.
The incoming impressive US macro data and hawkish words from a plethora of senior FOMC members drove investors to reduce their expectations for early and significant interest rate decreases this year.
According to current market pricing, the Fed might deliver four or five 25 basis point rate reduction in 2024, compared to seven such movements expected at the end of last year.
Dallas Fed President Lorie Logan said Friday that she is not in a hurry to drop interest rates and wants more evidence to ensure that the extraordinary achievement in lowering inflation is sustainable.
Separately, Atlanta Fed President Raphael Bostic stated that inflation has been too high for too long, and the US economy needs to prevent a further spike on its journey back to pre-pandemic levels.
The yield of the benchmark 10-year US The government bond yield is comfortably over 4.0%, which may continue to act as a tailwind for the dollar and contain advances in the currency pair.
ECB rate cut predictions may limit gains for the shared currency ahead of the US CPI report on Tuesday.
The recent confusing signals from European Central Bank officials over the chances for interest rate cuts may further discourage bulls from placing aggressive wagers on the shared currency.
Several ECB officials have worked hard to moderate expectations for early policy easing. But markets are pricing in the prospect of a first rate decrease at the beginning of the second quarter.
The expectations were supported by a drop in German inflation, which fell to 2.9% YoY in January from 3.7% the previous month, supporting the assumption that pricing pressures are lessening.
Adding to Fabio Panetta, an ECB Governing Council member, stated on Saturday. That the rate cut moment is rapidly approaching. And that timely and moderate moves could assist to limit the resulting volatility.
Traders may also choose to move to the sidelines. Ahead of the US consumer inflation statistics on Tuesday. Which might affect the Fed’s future policy decision and give some real momentum.
