EUR/USD: Hawkish ECB talks, upbeat EU data tease bulls near 1.0700, PMIs in focus

EUR/USD picks up bids to pare week-start losses, remains range-bound though.
ECB’s Rehn signals rate hikes beyond March, EU Consumer Confidence improved in February.
US holiday, mixed comments from the latest Fed talks and pullback in US Treasury bond yields weigh on US Dollar.
Preliminary readings of EU, German and US PMIs for February will be eyed for clear directions.

EUR/USD struggles to overcome the week-start losses as it rises to 1.0690 during the early hours of Tuesday’s sluggish Asian session. Even so, the major currency pair remains tight-lipped within a small trading range ahead of the key Purchasing Managers Indexes (PMIs) for February.

The quote’s latest pick-up could be linked to the hawkish comments from the European Central Bank (ECB) official. That said, ECB governing council member and Finnish central bank Chief Olli Rehn recently said, per Reuters, “ECB should keep raising interest rates beyond March and the rate peak, which should be stuck to for some time, could be reached over the summer.” “With inflation so high, further rate hikes beyond March seem likely, logical and appropriate,” Rehn told Germany’s Börsen-Zeitung newspaper.

Also underpinning the recovery moves could be the upbeat prints of Eurozone Consumer Confidence. That said, the first readings of the bloc’s Consumer Confidence for February matched market forecasts of -19 versus -20.9 prior.

Earlier on Monday, Germany’s Bundesbank released its monthly report and noted that the economic outlook was somewhat brighter with the short-term outlook turning more favorable than seen just a few months ago. The report also mentioned, “High inflationary pressures remain in place as the second round impact of quick wage growth is expected to keep Eurozone inflation above its target for an extended period of time.” On the same line were comments from France’s Finance Minister Bruno Le Maire who expected positive economic growth in 2023 and also believed that inflation should ease off from the middle of this year.

On the other hand, the latest comments from the Federal Reserve (Fed) officials, published on Friday, failed to reiterate the hawkish bias and hence joined a retreat in the US Treasury bond yields to weigh on the US Dollar.

Alternatively, challenges to the sentiment, especially emanating from geopolitical fears surrounding China, Russia and North Korea, seemed to have put a floor under the prices. On the same line could be the last round of the US data showing higher inflation and the Fed’s readiness for further rate lifts.

Against this backdrop, Wall Street was closed and US Treasury yields eased, which in turn weighed on the US Dollar Index (DXY) and allowed the EUR/USD to remain firmer, defending Friday’s rebound from the six-week low.

Moving on, the return of full markets may highlight the geopolitical fears surrounding the US-China tussles over Taiwan and balloon shooting, not to forget the North Korean missile firing, to weigh on the sentiment and the EUR/USD prices.

Additionally, flash readings of German, Eurozone and the US S&P Global PMIs for February will be important to watch for the pair traders. Should the activity data suggest further improvement in the respective economies, the latest hawkish comments from the ECB could gain validation and might help the quote to remain firmer, unless the Fed policymakers sound hawkish too.