EUR/USD set to take 1.1000 amid US default woes and hawkish ECB bets, Eurozone CPI eyed
- EUR/USD picks up bids to print mild gains while snapping three-day downtrend.
- US debt ceiling expiration talks, relief from First Republic Bank woes join downbeat yields to weigh on US Dollar.
- Euro cheers hawkish ECB talks despite mixed growth numbers as Eurozone HICP, CPI looms.
- US Factory Orders, risk catalysts are also important for clear directions ahead of Fed, ECB monetary policy decisions.
EUR/USD cheers US Dollar’s retreat to snap three-day downtrend near 1.0990 during early Tuesday morning in Europe. In doing so, the Euro pair also benefits from the market’s anxiety ahead of the key Eurozone inflation data amid return of the bloc’s traders after a long weekend.
It’s worth mentioning that the talks surrounding the US default and hawkish Fed bets, as well as about China growth and the Sino-American tension, seem to challenge the market’s previously US Dollar positive bias. The reason could be linked to the European Central Bank (ECB) Officials’ readiness to keep the rate hike, as well as rejection of the recession woes even if the latest Gross Domestic Product (GDP) for Eurozone and German appear softer.
That said, US Treasury Department renewed fears of US default by pulling forward the date of running out of funds to match obligations if the current debt ceiling isn’t altered, to June 01 from previously signaled July. Following that, Reuters came out with the news suggesting the US Senate Majority Leader Chuck Schumer’s push for an expedited process to consider a clean two-year suspension of the federal debt ceiling.
Further, chatters of US President Joe Biden’s call to four top US diplomats and arranging a meeting on May 09 also made rounds while US House of Representatives Speaker Kevin McCarthy mentioned that there is a bill sitting in the Senate as we speak that would put the risk of default to rest.
Elsewhere, a relief from the US First Republic Bank issue allowed traders to take a breather as the US regulators seized assets of the First Republic Bank and sold them to a new buyer, namely JP Morgan. “JPMorgan will pay $10.6 billion to the U.S. Federal Deposit Insurance Corp (FDIC) as part of the deal to take control of most of the San Francisco-based bank's assets and get access to First Republic's coveted wealthy client base,” said Reuters.
Against this backdrop, S&P 500 Futures print mild losses after retreating from a three-month high, down 0.10% intraday near 4,182 by the press time. On the same line, the US 10-year and two-year Treasury bond yields retreat from a one-week high to 3.55% and 4.13% at the latest.
Looking ahead, German Retail Sales for March and the ECB Bank Landing Survey may entertain EUR/USD pair traders ahead of the first readings of the Eurozone’s key inflation gauge for April, namely Harmonized Index of Consumer Prices (HICP). Given the likely unchanged figures, any negative surprise won’t hesitate to recall the EUR/USD bears amid hawkish Fed bets. In that case, today’s US Factory Orders for March, expected to rise by 0.8% MoM versus -0.7% prior, can offer clear directions ahead of Wednesday’s FOMC and Thursday’s ECB monetary policy meetings.
Technical analysis
Despite the late rebound, EUR/USD keeps the previous day’s downside break of an upward-sloping support line from late March, now immediate resistance near 1.1010, which in turn joins downbeat oscillators to favor Euro pair sellers.