EUR/USD: Focus on Draghi’s speech and US CPI

EUR/USD awaits strong follow-through to Friday’s bullish breakout.
ECB’s Draghi is scheduled to speak at 08:15 GMT.
A better-than-expected US CPI could yield a broad-based USD rally.

EUR/USD is consolidating above 1.13 ahead of Draghi’s speech and key US data releases.

The shared currency confirmed a technical breakout with a rise to 1.1348 on Friday. So far, however, a bullish follow-through has remained elusive with the upside capped near 1.1340.

The lack of strong follow-through could be associated with the recovery in the US-German (DE) yield spreads. For instance, the 10-year yield differential widened to 239 basis points on Tuesday – up 13 basis points from the low of 226 basis points registered on June 3.

The yield differential will likely narrow in the EUR-positive manner, helping the EUR/USD pair capitalize on Friday’s bullish breakout if the European Central Bank (ECB) President Draghi sounds less dovish during his speech at 08:15 GMT today. The central bank said last week that it would delay its first post-crisis rate hike until middle of next year and Draghi offered to pay banks if they pass on the cash borrowed from the ECB to households and firms.

The gains in the EUR/USD, however, will likely be short-lived, if the US reports a better-than-expected consumer price inflation for May at 12:30 GMT today.

It is worth noting that the Fed funds futures are currently pricing in three rate cuts for 2019. Many including the likes of Goldman Sachs believe the markets have overpriced Fed rate cuts and the central bank will stand pat for the rest of the year.

That argument would gain credence with an above-forecast US inflation number, forcing the markets to scale back the dovish Fed expectations and possibly leading to a broad-based USD rally.

Pivot points

1. R3 1.1381
2. R2 1.136
3. R1 1.1344
PP 1.1322
1. S1 1.1306
2. S2 1.1285
3. S3 1.1269

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.