- EUR/USD is looking to reclaim 1.0700 amid a recovery in the market mood.
- The USD Index has refreshed its day’s low at 103.58 as the geopolitical tensions-inspired volatility has faded away.
- Goldman Sachs expects the Fed to raise interest rates three more times this year.
The EUR/USD pair has attempted a recovery after dropping to near 1.0673 in the early European session. The major currency pair is looking to reclaim the round-level resistance of 1.0700 as the risk aversion theme has lost its traction. Investors have ignored the US-China tensions and North Korea’s missile attacks near Japan’s Exclusive Economic Zone (EEZ) region. However, the United States (UN) Securities Council is holding a meeting to discuss North Korea’s action after Japan urged the former.
S&P500 futures have recovered their entire losses despite volatility ahead of Monday’s holiday on account of Presidents’ Day. The 500-US stocks basket ended the week on a mixed note as investors digested renewed fears of inflation recovery. Meanwhile, the US Dollar Index (DXY) has refreshed its day’s low at 103.58 as the geopolitical tensions-inspired volatility has faded away. The USD Index is looking to test Friday’s low around 103.50.
For further guidance, investors have shifted their focus toward the release of the Federal Open Market Committee (FOMC) minutes, which will release on Wednesday. The market participants will keenly watch for the inflation projections and cues related to March’s monetary policy.
Considering the fresh rise in January’s Retail Sales data, the Federal Reserve (Fed) is expected to remain hawkish ahead and might push interest rates to 5% region. A recovery in consumer spending could be offset by restrictive monetary policy. A note from Goldman Sachs states the investment banking firm expects the U.S. Federal Reserve to raise interest rates three more times this year, lifting their estimates after data pointed to persistent inflation and a resilient labor market, as reported by Reuters.
On the Eurozone front, investors are focusing on the S&P Global PMI numbers, which will release on Tuesday. The Manufacturing PMI is seen higher at 49.3 against the former release of 48.8. While the Services PMI is expected to improve to 51.1 from the prior release of 50.8.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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