The EUR/USD pair dropped to over two-week lows, round the 1.1835 location at some stage in the Asian session on Wednesday, albeit recovered few pips thereafter. The pair was once closing viewed hovering round mid-1.1800s, almost unchanged for the day.
Following the preceding day’s sharp fall of almost one hundred pips, the pair now looks to have entered a bearish consolidation section as traders watch for clean catalyst from Wednesday’s flash Eurozone PMIs. That said, the essential backdrop stays tilted in favour of bearish merchants and helps possibilities for in addition weakness.
The US greenback remained properly supported by way of the upbeat US monetary outlook, bolstered by means of the wonderful tempo of COVID-19 vaccinations and the passage of a big stimulus package. Apart from this, the widespread risk-off temper similarly benefitted the greenback’s safe-haven reputation and cap the upside for the EUR/USD pair.
The international threat sentiment took a hit after Western nations imposed sanctions on Chinese officers over the human rights violations in Xinjiang. The flight to security picked up tempo in response to Treasury Secretary Janet Yellen’s feedback that tax hikes will be wanted to pay for infrastructure initiatives and different public investments.
This, alongside with easing inflation concerns acted as a headwind for the US bond yields, albeit did little to dent the bullish sentiment surrounding the USD. The Fed Chair Jerome Powell, testifying earlier than the House Financial Services Committee on Tuesday, downplayed the dangers that monetary increase would spur undesirable inflation.
On the different hand, the shared foreign money was once weighed down by using developing market worries about the 1/3 wave of COVID-19 infections, pandemic-related lockdowns and the sluggish vaccine rollouts in Europe. Several European international locations prolonged or reintroduced lockdown measures in an effort to curb rising cases, fuelled by way of extra contagious new variants.
The countless lockdown is predicted to have ruined the recuperation in the Eurozone’s dominant offerings enterprise and hence, Tuesday’s launch of Services PMIs will lift greater significance. Weaker readings will add to the narrative of uneven monetary recuperation in the region, which have to pave the way for extra weak spot for the EUR/USD pair.