For the second day in a row, the EUR/USD is in the red.
Despite the ECB’s troubles, the words of policymakers benefit the sellers.
USD bulls are supported by stable US Treasury yields and pessimistic stock futures.
Other than the Covid update and Fespeak, German inflation numbers for June, ECB President Lagarde will entertain the bears.
During the two-day downturn to early Tuesday, EUR/USD remains on slick ground, refreshing intraday lows around 1.1910. As the US dollar index (DXY) remains on the front foot, the currency major pair posts the highest daily losses, 0.12 percent as of press time. The cautious tone among Euro (EUR) traders ahead of critical German inflation data and ECB President Christine Lagarde’s speech could also support the pair sellers.
In a second good day, the DXY consolidates last week’s drop from the monthly high, rising 0.08 percent intraday around 91.95. The coronavirus (COVID-19) strain’s problems in Asia and the UK, combined with confusing signals from US Federal Reserve (Fed) policymakers, have put a safe-haven premium beneath the US dollar. The slowdown in Treasury yields, which had dropped to their lowest level since June 18 the day before, is also favorable for the US currency.
The EUR/USD is further weighed down by ECB policymaker Robert Holzmann’s comments signaling no room for rate hikes amid low inflation, as well as a long road ahead to wrap up the Pandemic Emergency Purchase Program (PEPP) once the coronavirus crisis is resolved. Furthermore, the growing uncertainty surrounding the Brexit discussions, as well as Germany’s effort to prohibit British travelers, put additional downward pressure on the currency.
The pair sellers are being probed by a light calendar in Asia and month-end positioning, as well as mixed concerns over US President Joe Biden’s infrastructure investment bill. Senate Republican Major Mitch McConnell’s efforts to temper Democratic demands on tax rises contrast with Biden’s drive for greater stimulus.
Stock futures in the US and Europe suffer minor losses as a result of these moves, while markets in Asia-Pacific are also under pressure.
Looking ahead, following Berlin’s factory-gate inflation increased the previous day, the preliminary reading of June’s German Harmonized Index of Consumer Prices (HICP), projected at 2.1 percent YoY versus 2.4 percent, will be widely watched for immediate direction. While the same could aid the EUR/USD in consolidating recent gains, comments from ECB President Lagarde will be more significant in light of the bloc’s recent ambivalence on the PEPP and economic outlook.
The covid updates and Fedspeak are also on the minds of EUR/USD traders. The attitude ahead of the US jobs report, on the other hand, may keep the main currency pair’s short-term movements in control.
Unless the 200-day EMA is crossed on a daily closing basis, which is expected to happen around 1.1940 at press time, EUR/USD will continue to trend towards the monthly low near 1.1845.
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