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- EUR/USD pares intraday gains during the second positive week since early November.
- Fedspeak shifts gears over inflation, ECB pushes for extended PEPP.
- US data stays firmer but Eurozone economics dwindle, yields lick wounds at 10-week low.
- Fedspeak, US Jobless Claims, Eurozone Unemployment Rate and Omicron news are the key ahead of Friday’s US NFP.
EUR/USD retreats from intraday high to 1.1325, consolidating daily gains to 0.12% ahead of Thursday’s European session.
Even so, the currency major pair stays on the recovery mode for the second consecutive week as the monetary policy battle between the European Central Bank (ECB) and the US Federal Reserve (Fed) seems to ease. Though, headlines concerning the South African covid variant and Friday’s US jobs report for November will be the key to a clear direction.
While Fed Chair Jerome Powell stepped back from conveying his inflation woes during the second day of testimony, ECB policymakers conveyed, per Reuters, worries over the likely monetary policy tightening in December. On the contrary, Federal Reserve Bank of New York President John C. Williams said, per New York Times, that Omicron could prolong supply and demand mismatches, causing some inflation pressures to last. Further, Cleveland Fed President Loretta Mester hints at speeding up the taper and likely rates in the next year, per Bloomberg.
It should be observed that the receding inflation fears and a two-month low print of the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, weigh on the US Treasury yields. The same joins cautious optimism from China to help the stock futures and Asian stocks to lick their wounds.
However, the first Omicron case in the US pushed President Joe Biden’s administration to extend the rules for wearing a mask in public transit, the same seems to put a floor under the US 10-year Treasury yields around 1.42%.
Looking forward, weekly Initial Jobless Claims and a slew of Fed and ECB policymakers’ speeches may entertain EUR/USD traders but major attention will be given to the coronavirus news and Friday’s US Nonfarm Payrolls (NFP).
Technical analysis
Unless crossing a double-top figure surrounding 1.1385, comprising highs marked on November 16 and 30, EUR/USD bears stay hopeful to refresh the yearly low.