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EUR/USD gains amid mixed ECB stance on policy easing

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  • EUR/USD rose to 1.0784 on mixed central bank notes and economic data, extending gains for a third day.
  • The Fed’s cautious stance on rate cuts was highlighted, with Goolsbee’s dovish view contrasting with Powell’s dovishness.
  • US Treasury yields hit 2024 high, boosting USD amid mixed reactions to CPI updates.
  • German inflation continues to fall, fueling the ECB’s debate over the timing of rate cuts.

The EUR/USD At the start of trading in the North American session, they rose steadily for the third day in a row, driven by the latest central bank comments from the representatives of the Federal Reserve System (Fed) and the European Central Bank (ECB). At the time of writing, the pair was trading at 1.0784 after hitting a daily low of 1.0762.

Mixed stances from Fed and ECB officials keep EUR/USD swinging below 1.0800

Over the past week, Fed policymakers have emphasized that it is too early to cut rates, even though the process of disinflation has continued. On the “most aggressive” dovish side lies Chicago Fed Austan Goolsbee, who remains bullish on the economy and inflation and has been the board’s most active dove. Other regional Fed Bank presidents such as Susan Collins, Neil Kashkari and Thomas Barkin took a position in line with the Fed chairman. Jerome Powell. Although Barkin was asked about Powell’s comments, he said, “Chairman Powell always speaks for the committee.”

That lifted U.S. Treasury yields, with the 10-year note yielding 4.173% after touching 4.195%, a 2024 high, a tailwind for the dollar, which has been swinging between gains and losses as shown American dollar Index (DXY). DXY is holding at 104.00, down 0.05%.

Recently, the US Department of Labor unveiled revisions for US consumers Price index (CPI) and confirmed progress in inflation, with CPI at 3.3% year-on-year, while core CPI at 3.7%.

On the other hand, German data revealed that inflation fell from 3.8% to 3.1% year-on-year. This maintains the ECB’s progress in curbing inflation. Meanwhile, ECB officials Holzmann and chief economist Lane remain cautious about opening the door to a rate cut, with the former saying: “There is some chance that interest rates will not be cut at all this year or at the very beginning of the year. end of the year.” On the dovish side, Kazaks and Villeroy remain optimistic about the disinflation process and maintain their policy easing stance.

EUR/USD Price Analysis: Technical Outlook

The pair remains biased to the downside, unable to break the 200-day moving average (DMA) at 1.0787, which could open the door to a break above 1.0800. Relative Strength Index (RSI) studies remain bearish, with a flat slope, indicating that the bears remain in charge. So the path of least resistance is down, with further support appearing at 1.0741, today’s low, followed by the weekly low of 1.0722. Another downside lies at 1.0700.

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