Where we are: EUR/USD is currently trading at 1.1643, down 0.15% on the day. The pair has been confined to a tight intraday range of 1.1642-1.1665. This level is testing Friday’s low and suggests a potential break lower if dollar strength continues through the NY session.
What’s driving it: The Euro is under pressure as the ECB maintains a mild easing bias. While some ECB policymakers would have supported an April rate hike, the general consensus leans towards a data-dependent approach. Dovish signals are being reinforced by recent Eurozone data. The benign view on inflation expressed by Eurozone consumers is not being matched by investor sentiment, who are seeing that this could cause them to lag behind in their targets compared to their American counterpart. DXY strength, now at 99.06, is exacerbating the Euro’s woes.
- ECB’s Schnabel highlights the risk of unanchored inflation expectations stemming from geopolitical uncertainties.
- Eurozone HICP remained at 2%, while Core HICP (excl energy, food) fell by 0.1% to 2.3%.
- Speculator positioning in the Euro is modestly long, with net non-commercial contracts at +29,426, leaving room for potential long liquidation.
NY session focus: All eyes are on the US data today, specifically the ISM Manufacturing PMI at 10:00 ET. A stronger-than-expected print (forecast 53.3) could fuel further dollar strength, pushing EUR/USD lower, potentially testing 1.1600. Conversely, a miss could offer a temporary reprieve. Also on tap is FOMC Member Powell Speaks, this could bring about changes in dollar rates. The current trade favors short EUR/USD on rallies. The pain trade is a weak ISM print combined with dovish Powell remarks leading to a dollar sell-off.