EUR / USD bounces off annual lows despite USD rebound, US / EU PMI in sight
- EUR / USD is trading with caution after falling for four consecutive sessions on Friday.
- The US dollar index recovers initial losses and is trading above 94.30.
- The Fed official from Hawkish, growing concerns about inflation and negative economic data reverberate as talking points.
EUR / USD continues its bearish momentum since the start of the week during Friday’s Asian session. The rebound in the US dollar pushes EUR / USD into a narrow trade band in a movement of less than 10 pips. At the time of writing, EUR / USD is trading at 1.1576, down 0.08% for the day.
The US Dollar Index (DXY), which tracks the performance of the greenback against the six major currencies, manages to rebound from the early lower levels and holds above 94.30, sustaining the EUR / USD under control.
Investors have digested rising expectations of a cutback in Federal Reserve stimulus that could begin as early as November and a possible interest rate hike in late 2022. On top of that, the Speaker of the House of States United, Nancy Pelosi, said the legislation would keep services functional, prevent holidays. for hundreds of thousands of workers and protect the economy. The House will vote for the $ 1.2 billion infrastructure bill on Friday. This, in agreement, increases the demand for the greenback.
Earlier, mixed economic data pulled the greenback a little lower during the US session. Initial jobless claims unexpectedly rose for a third straight period to 362K against market expectations of a decline to 335K as US gross domestic product (GDP) grew 6.7% in the second quarter, slightly above the market consensus of 6.6%.
On the other hand, the common currency remained depressed amid a divergence between the ECB’s and the Fed’s stance on declining and bullish economic data. ECB President Christine Lagarde sees inflation problems as transitory and opts for an accommodative monetary policy. On the economic data front, the eurozone unemployment rate hit a 15-month low of 7.5% in August.
On top of that, eurozone finance ministers will discuss skyrocketing energy prices on Monday over concerns about the slowing economic recovery, the outlook for higher inflation and the impact on decisions to make. ‘investment.
For now, traders are waiting for the Eurozone inflation rate, the Markit Manufacturing Purchasing Managers (PMI) index, the US PCE price index and the ISM Manufacturing PMI to gauge market sentiment.