- EUR/USD has continued to juggle below 1.0800 as the focus has shifted to ECB Lagarde’s speech.
- Weak retail demand and lower US PPI resulted in a sell-off in the S&P500 futures.
- The speech from ECB’ Lgarade will provide cues about the likely monetary policy action ahead.
The EUR/USD pair is displaying a lackluster performance below the critical resistance of 1.0800 in the Asian session. The major currency pair has turned sideways as investors are awaiting the speech from European Central Bank (ECB) President Christine Lagarde for fresh impetus.
The risk-off profile is turning huge further as the carry-forwarded selling pressure in the S&P500 futures is demonstrating a weaker risk appetite of the market participants. Weakness in United States equities was driven by the lower-than-anticipated Producer Price Index (PPI) and Retail Sales report. Poor retail demand has triggered the risk of lower sales, which might impact the operating margins of various firms.
Hawkish commentary from Federal Reserve (Fed) policymakers resulted in a V-shape recovery for the US Dollar Index (DXY). The majority of Fed policymakers are favoring slowing the pace of hiking interest rates but haven’t trimmed terminal rate projections. Philadelphia Fed President Patrick Harker expects terminal rate projection in a 5.25-5.50% range and achievement of 2% inflation in CY2025, as reported by Reuters.
The US Treasury yields are displaying volatility as investors are in a fix on whether to provide strength to the yields due to hawkish commentary from Fed policymakers or to build shorts amid lower PPI-inspired drop in inflation projections.
On the Eurozone front, the speech from ECB’s Lagarde will provide fresh cues about the likely monetary policy action in February. Earlier, Bloomberg reported that ECB policymakers are starting to consider a slower pace of interest-rate hikes after a likely 50 basis-point step in February. “The rapid energy-driven decline in headline inflation is giving the ECB a bit of breathing space, but policymakers will remain focused on persistent underlying pressures for now.
