- Euro trims losses versus US dollar, recovers 1.1600.
- US dollar retreats across the board as US yields slide.
The EUR/USD bottomed earlier on Monday at 1.1589, reaching the lowest level in a week. After the beginning of the American session, it rebounded, and it is hovering around 1.1615, down for the day, but off lows.
The break under 1.1615 in EUR/USD ended days of a range trading between 1.1615 and 1.1670. The euro is back near the 1.1620 area; a recovery back above should alleviate the bearish pressure. The euro remains among the worst performers on Monday ahead of Thursday’s ECB meeting.
“The Eurozone focus is on the ECB meeting, but I don't think it's a big market driver, barring a jaw-dropping shift to a hawkish bias. What the euro needs, if it is to make a break higher, is better economic data. Supply-chain issues have hurt and if that doesn't change, then the euro will meander until the US rate outlook triggers the next leg down in EUR/USD and a further reversal of the move up we've seen since the Fed came to everyone's aid in March 2020”, said Kit Juckes, Chief Global FX Strategist at Société Générale.
The dollar lost momentum amid a decline in US yields. The 10-year dropped from 1.68% to 1.62% in a few minutes, and pushed the DXY away from the 94.00 area. Also, risk appetite weighed on the greenback. The S&P 500 index hit a record high and is up 0.28%; the Nasdaq gains 0.52%.
Economic data from the US surpassed expectations with the Dallas Fed Manufacturing Index rising to 14.6 in October above the 6.8 of market consensus. The key report will be Q3 growth numbers on Thursday.
Technical levels
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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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