- EUR/USD adds to Friday’s gains well north of 1.1000.
- Industrial Production in Germany contracts more than expected.
- Fed-ECB policy divergence takes centre stage.
EUR/USD extends the rebound for the second session in a row and revisits 2-day highs in the 1.1050 region on Monday.
EUR/USD shifts the attention back to 1.1100
EUR/USD surpasses the 1.1000 barrier with certain conviction amidst the continuation of the selling mood in the greenback, as investors keep digesting April’s Nonfarm Payrolls published on Friday.
In the meantime, hawkish ECB-speak should keep further tightening in the next couple of meetings on the table, while speculation of a most likely pause at the Fed’s hiking cycle in June is seen keeping the Buck under pressure for the time being.
In the euro docket, Industrial Production in Germany contracted at a monthly 3.4% in March, while Wholesale Inventories is only due across the ocean.
What to look for around EUR
EUR/USD’s recovery picks up extra pace and seems to have now re-shifted its attention to the 1.1100 region.
The movement of the euro's value is expected to closely mirror the behaviour of the US Dollar and will likely be impacted by any differences in approach between the Fed and the ECB with regards to their plans for adjusting interest rates.
Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.
Key events in the euro area this week: Germany Industrial Production (Monday) – Germany Final Inflation Rate (Wednesday).
Eminent issues on the back boiler: Continuation (or not) of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.
EUR/USD levels to watch
So far, the pair is up 0.30% at 1.1050 and the surpass of 1.1095 (2023 high April 26) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022). In opposition, the next support is seen at 1.0941 (monthly low May 2) followed by 1.0909 (weekly low April 17) and finally 1.0831 (monthly low April 10).
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