EUR/USD Faces Key Test With US CPI and ECB Meeting This Week
The economic calendar is full of key data from the US this week, which should make for a volatile week for all the major pairs. But the fact we also have an interest rate decision from the ECB to look forward to means the EUR/USD will be among the more active pairs, making it the currency pair of the week to watch.
The Dollar Index (DXY) rose for the eighth consecutive week, closing above 105.00 on Friday. But the rally in the yen on Monday on the back of hawkish comments from BOJ Governor Ueda, who said that the BoJ could have sufficient data by the end of the year to determine whether rates should stay negative or not, caused the Dollar Index to move back below the 105.00 level. By Tuesday morning, however, the DXY was bouncing back, thanks to renewed weakness in pairs such as EUR/USD and GBP/USD.
Without a significant change in the current macro backdrop, the dollar continues to find buyers on the dips. The greenback has been supported in recent weeks by US data continuing to surprise to the upside, while weakness in foreign data and currencies also helped to provide indirect support. We had better-than-expected ISM services PMI and weekly jobless claims data last week, putting some doubts over the narrative that the labor market tightness was easing.
Eurozone and Chinese data, in particular, have been rather weak, and correspondingly we have seen the euro and yuan slump against the dollar. But there was some relief for the yuan on Monday as the PBOC set the daily fixing stronger and by a record margin while also delivering a verbal intervention to correct one-sided moves in the market. It remains to be seen, however whether the latest efforts will have any lasting impact. I am doubtful.
Investors’ focus will turn to
Read more on investing.com
