On Tuesday, EURUSD reclaims its positive momentum on turnaround, lifting the pair above the 1.0900 level. After two consecutive days of decline, the single currency managed to gain traction due to corrective weakness in the US dollar and a marked rebound in the risk complex.
The EUR/USD pair is currently looking at data and the US dollar as key factors for its next move. Investors are anticipating a 25 bps rate hike from both the ECB and the Federal Reserve, and the likelihood of a move on rates on the latter has increased following the solid US jobs report published on Friday.
The bounce in the EUR/USD pair was also supported by the positive performance of the German 10-year Bund yields, which approached the 2.30% region and added to Thursday’s gains. This positive performance emerged despite concerns about some loss of momentum in economic fundamentals in the region.
This week, key events in the euro area include the EMU Sentix Index and Retail Sales on Tuesday, and the Germany Final Inflation Rate and EMU Industrial Production on Thursday. Eminent issues on the back burner include the continuation or not of the ECB hiking cycle, the impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region, and the risks of inflation becoming entrenched.
Forex is a key factor in the movement of the EUR/USD pair. Traders closely follow the dynamics of the US dollar and the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates. As such, traders should keep a close eye on forex developments to make informed trading decisions.