EURUSD is expected to take 1.1000 as a result of US default fears and hawkish ECB wagers

EURUSD picks up bids to post modest gains, reversing a three-day downturn.

During early Tuesday morning in Europe, the EURUSD cheers the US Dollar’s retreat, breaking a three-day downtrend near 1.0990. As a result, the Euro pair gains from market concern ahead of critical Eurozone inflation data. As traders return to the region after a long weekend.

It’s worth noting that discussions about the US default and hawkish Fed bets. As well as China growth and Sino-American tensions, appear to contradict the market’s prior bullish tilt towards the US Dollar. The explanation might be connected to European Central Bank (ECB) officials’ willingness to maintain the rate rise, as well as their denial of the recession problems. Even though the latest Gross Domestic Product (GDP) figures for the Eurozone and Germany seem lower.

Having said that, the US The Treasury Department stoked worries of a US default by moving the date of running out of cash. To meet commitments if the existing debt ceiling is not raised to June 1 from July 1. Following that, Reuters reported that US Senate Majority Leader Chuck Schumer had requested an expedited process. To consider a clean two-year suspension of the federal debt ceiling. Furthermore, rumors circulated about US President Joe Biden calling four top US diplomats. And arranging a meeting on May 9.

The US Dollar is being weighed down by debt ceiling discussions, relief from First Republic Bank difficulties, and low rates.

Traders were able to take a respite from the US First Republic Bank crisis as US regulators confiscated the bank’s assets and sold them to a new bidder, notably JP Morgan. On the other hand, recent remarks from China Beige Book (CBB) claiming that new statistics provide the first signs of a really solid 2023 rebound in the dragon country, according to CBB experts, appear to favor EURUSD bulls. However, Axios published headlines implying that the US allies are preparing for a war with China over Taiwan, which keeps Euro bears optimistic via the US Dollar’s haven demand.

Despite mixed growth figures, the Eurozone HICP and CPI are on the horizon.

It’s worth noting that Friday’s optimistic US inflation hints through the Core PCE Price Index join Monday’s. Mainly higher US PMI data to support hawkish Fed (Fed) bias and impact on mood. The US inflation predictions are in line with the 10-year and 5-year breakeven inflation estimates from the statistics from the Federal Reserve Bank of St. Louis (FRED).

Against this environment, S&P 500 Futures are down 0.10% intraday around 4,182. After retreating from a three-month peak. In the same vein, US 10-year and two-year Treasury bond rates have fallen. From a one-week high to 3.55% and 4.13%, respectively.

US factory orders and risk triggers are especially critical for establishing clear trends ahead of Fed and ECB monetary policy decisions.

Ahead of the first readings of the Eurozone’s primary inflation barometer. The Harmonized Index of Consumer Prices (HICP), for April. Traders may be interested in German Retail Sales for March and the ECB Bank Landing Survey. Given that the statistics are anticipated to remain unchanged, any negative surprise may jolt EURUSD bears amid hawkish Fed forecasts. In that scenario, today’s US Factory Orders for March. Which are predicted to grow by 0.5%, are important 0.8% MoM vs -0.7% before can provide clear direction ahead of the FOMC and ECB monetary policy meetings on Wednesday and Thursday, respectively.

Daily Trend