EUR/USD REBOUNDS FROM 1.0900 AS INVESTORS IGNORE US INFLATION-INSPIRED ANXIETY

The EUR/USD pair has shown a recovery move after a minor correction to near the round-level support of 1.0900 in the early Asian session. The major currency pair is looking to extend its recovery above the immediate resistance of 1.0928 as investors don’t seem anxious ahead of the release of the United States Inflation data.

S&P500 remained choppy on Tuesday as technology stocks dragged on expectations of weaker revenue guidance. Investors are hoping for weak guidance from tech-savvy stocks amid higher rates from the Federal Reserve (Fed). Also, recent banking turmoil could impact the quarterly result of the banking sector, portraying a cautious market mood.

The US Dollar Index (DXY) has dropped to near 102.15 after failing to extend its recovery above 102.30. The USD Index is likely to extend its downside below the 102.00 support as investors have digested expectations of more rate hikes from the Federal Reserve (Fed).

Meanwhile, the commentary from Chicago Fed President Austan Goolsbee has also weighed on the US Dollar. Fed policymakers have advised a cautious approach as the combination of tight credit conditions and further restrictive monetary policy can hit sectors and regions differently than if monetary policy was acting on its own.

For further guidance on the US Dollar, US Consumer Price Index (CPI) will be keenly watched. Analysts at Danske Bank expect “While lower energy prices will ease March headline inflation to around 0.2% MoM, we expect core inflation to remain elevated at 0.4%.”

On the Eurozone front, monthly Retail Sales contracted by 0.8% as expected by investors. And, annual Retail Sales contracted by 3.0% while the street was anticipating more contraction to 3.5%. However, the European Central Bank (ECB) will keep on hiking rates despite evidence of a decline in retail demand.

ECB Governing Council member Francois Villeroy de Galhau warned that “Inflation is becoming more prevalent and potentially more persistent.” He further added, “The impact of rate hikes will be amplified in the coming months.”