EUR/USD sellers approach 1.1400 on draft EU forecasts, firmer yields, US inflation eyed
- EUR/USD adds to weekly losses, refreshes intraday low.
- US Treasury yields remain strong, stock futures drop as draft for EU Economic Forecasts reject inflation fears.
- White House comments, Fedspeak add to market’s indecision ahead of the key data.
- Details of EU Quarterly Economic Projections, US CPI will be crucial for fresh impulse.
EUR/USD consolidates the previous day’s gains, adding to the weekly loss around 1.1415 during Thursday’s Asian session. In doing so, the major currency pair reacts to the market’s fears of US inflation and the draft of the European Commission’s (EC) economic forecasts.
Bloomberg conveyed quarterly economic updates from the European Commission draft ahead of the final announcements, scheduled for release today. As per the news, inflation is likely to ease in 2023 while the GDP may improve. That said, the growth figures are cut in 2022 by 0.3% to 4.0% whereas inflation figures are likely to arrive at 3.5% for the current year.
“Euro-area inflation will ease below the European Central Bank’s 2% target next year, according to new draft projections from the European Union that will feed the growing debate about how quickly to raise interest rates,” said Bloomberg.
On the other hand, the White House (WH) conveyed expectations of a higher YoY inflation figure while also saying, “Its irrelevant month on month number will continue trending lower the rest of the year.” Following that, WH Economic Adviser Brian Deese said that he sees reason to think that factors boosting inflation will moderate over time.
Additionally, Cleveland Fed President Loretta Mester supported the March rate hike while Atlanta Federal Reserve President Raphael Bostic told CNBC on Wednesday he is hopeful that they will start to see a decline in inflation. Fed’s Bostic also said, "Leaning toward the need for a fourth interest rate increase in 2022."
It should be observed that recent escalation in the US-China trade tussles and fears over Russia’s invasion of Ukraine seems to take a back seat for now.
Amid these plays, the US 10-year Treasury yields pause the previous day’s pullback from the highest levels since July 2019 while the S&P 500 Futures remain indecisive despite Wall Street’s upbeat performance on tech-rally and strong earnings.
Moving on, final readings of the EC’s quarterly economic forecasts will precede the US Consumer Price Index (CPI) data for January to entertain EUR/USD traders. Given the already leaked signals for EC projections, as well as higher hopes from the US CPI, US inflation figures will be crucial.
Read: US Inflation Preview: Core CPI above 6% could spark next dollar rally
Technical analysis
Unless crossing the three-month top surrounding 1.1485, the EUR/USD prices are likely to remain pressured towards the highs marked in November and December of 2021, near 1.1385.