A Much-Anticipated Bounce-Back
The EUR/USD trading pair has returned to its place of positive consolidation from Tuesday’s trading session, and it broke two consecutive days of losses from a low that lasted more than one week. The positive U-turn in the risk sentiments puts the safe-haven status of the US dollar under some form of control, and it was in turn taken as a major factor that elongated the support of the pair.
EUR/USD price chart. Source TradingView
Russia’s announcement of the return of some of its troops back to their bases after the end of a purported military drill near the Ukraine border has gone a long way to ease market tensions over a full-scale military engagement with Western countries. The news brought much-needed calm and aided a quick rally in markets, making many investors drop conventional safe-haven assets.
One Zone, Varying Experiences
On the economic report side, the Eurozone’s Q4 GDP second estimate ascertained that the Eurozone economy grew by 0.3% in the October to December time frame. In a different report, Germany’s ZEW economic sentiment index rose in February from 5.17 to a significant 54.3. However, the exciting news was undermined by a low EU economic sentiment that landed at 48.6 for February.
America’s Empire State Manufacturing Index went up from -0.7 to a less-than-expected 3.1 this month, while on the other hand, the producer price index went beyond the popular estimate and settled close to 9.7% year-on-year in January from 9.8% it was at in December. It was also undermined by political developments affecting the US.
The possibility of a more momentous policy tightening by the Federal Reserve as well as risk-on impulses has elevated gains on the benchmark ten-year American government bond over its 2% threshold. This went on to reduce the downward effect on the dollar while it put a cap on more gains for the pair. Market players strongly believe that the Federal Reserve will take on a more aggressive monetary policy position to fight the escalating inflation, and they have continued to price in up to a 50 basis points interest rate increase by March.
Therefore, what the market will be looking forward to the most is the Federal Open Market Committee meeting report scheduled to be published on Wednesday. While waiting for that, some trading opportunities might be produced around the pair by the monthly retail sales.
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