- EUR/USD finds some bids after an intense sell-off to near 1.0640 on souring market mood.
- The renewed fears of stagflation in Europe have underpinned the greenback against the shared currency.
- Investors are focusing on the speech from ECB’s Lagarde.
The EUR/USD pair is displaying a dead cat bounce after printing a fresh two-year low at 1.0636 in the late New York session as the risk-off impulse mounts higher. The uncertainty over the interest rate decision to be taken by the Federal Reserve (Fed) in May has put the market participants on their toes. This is resulting in a higher appeal for the US dollar index (DXY) and a sell-off in the risk-perceived currencies whose effect is clearly witnessed in the recent sell-off of the shared currency.
The eurozone is underperforming against the greenback as the renewed fears of stagflation amid the Ukraine crisis have worsened the decision-making for European Central Bank (ECB) policymakers. Soaring inflation in Europe due to high energy bills and food prices along with the expectation of a slash in the growth forecast stated by ECB President Christine Lagarde in her testimony at the International Monetary Fund (IMF) meeting has restricted the ECB from marching toward policy tightening.
Meanwhile, the US dollar index (DXY) is facing a minor pullback as profit-booking kicks in after the DXY printed a two-year high at 102.36. On a broader note, the DXY is firmer and will resume its upward journey after a minute correction.
For further guidance, investors will keep an eye on the speech from ECB’s Lagarde, which is due on Wednesday. This will provide insights into the likely monetary policy action by the ECB in June. On the DXY front, the market participants will focus on the annual Gross Domestic Product (GDP) numbers, which are likely to land at 1.1%. While the quarterly GDP is expected to print at 7.2%.
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