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EUR/USD marches towards 1.0440 as US Dollar resumes a downside journey

  • EUR/USD is aiming to recapture Thursday’s high at 1.0445 as US yields extend losses further.
  • A slowdown in an interest rate hike by the Fed could a double-edged sword.
  • Eurozone investors are eyeing the European gas price cap structure ahead.

The EUR/USD pair has extended its recovery after overstepping the immediate resistance of 1.0420 in the Tokyo session. The Euro pair is aiming to recapture Thursday’s high at 1.0445 as the USD Index (DXY) has resumed its downside journey after showing a wild gyration in its early trade. The US Dollar is declining towards Thursday’s low at 105.64 as investors are channelizing funds again into the risk-sensitive assets after returning from a holiday in the United States on account of Thanksgiving Day.

S&P500 futures are flat while the US Treasury yields are facing immense pressure. The yields on long-term US Treasury bonds have slipped below 3.66% as odds are pointing for a less-hawkish stance in December monetary policy meeting by the Federal Reserve (Fed) chair Jerome Powell.

Investors are punishing the US Dollar as Fed policymakers have vouched for a slowdown in the interest rate hike. Fed policymakers believe that headline United States Consumer Price Index (CPI) has displayed signs of severe exhaustion, therefore, it would be optimal to go on a light note on policy rates. However, the core CPI that excludes oil and food prices has not shown a significant drop.

Also, US Durable Goods Orders released this week remained significantly higher at 1% than expectations and former print. This could add fuel to the core inflation figures. So, choosing the option of deceleration in the interest rates could be a double-edged sword for the market.

On the Eurozone front, investors are keeping an eye on the price cap structure to be introduced for the European gas ahead. Supply chain bottlenecks in the Eurozone have been firing energy prices due to sanctions on Russia. Intercontinental Exchange (ICE) has warned that the finalization of the ceiling on European gas would force energy traders to stump up an additional $33 bln in margin payments, as reported by Financial Times.