EUR/USD Gets Off Monthly Decline to reclaim 1.0500

Further Pace for the Pair

EUR/USD currency pair has further picked up bids and is consolidating its losses close to 1.0495. The pair have stayed close to a monthly low point in the course of a downtrend lasting three days. These all went down in the early European session as business began on Monday.

The currency pair printed its largest weekly loss since the end of April on Friday. It was the result of the US inflation report. The report increased the expectation of a more rapid rate increase by the Federal Reserve.

EUR/USD price chart. Source TradingView

That said the consumer price index increased by 8.6% year-on-year against 8.3%speculated. Whereas, the central CPI increased by 6.0% year on year against the speculated decline to 5.9%. the central consumer price index was initially at 6.2% one month before.

It should be noted that the low point of the Michigan consumer sentiment index to 50.2 against the revised 58.1. But the move could not stop the bulls of the US Dollar. 

Aside from the inflation in the US, the COVID concerns in China weigh heavily on the EUR/USD pair. The tussle between China and the US over Taiwan equally added to the pair’s downtrend. There was an increase in Beijing’s COVID figures over the weekend and brought back some restrictions and fresh testing.

China Resists the US Over Taiwan

Shanghai is also having the same experience. The Beijing Local Government has said the recent outbreak is linked to a bar in the city and it is a ferocious variant. The country’s Defense Minister also stated on the relationship between China and the US has got to a crossroads.

The Minister said again that China would fight to the end if there is an attempt to make Taiwan secede from China. Those who look for Taiwan to get independence will not come to a good end, he emphasized.

In the European Union, many ECB policymakers tried to clarify the bank’s 25 basis point rate increment. They equally stated that the limit is not cast in stone if inflation persists. Note that the region’s inflation renewed its record high in its recent print.

The S&P Futures portrayed the mood of the market as it fell for the fourth day in a roll. It got back to a monthly low point at about 3,845, going down by 1.35%. The US stock market, therefore, stays in the direction of the annual low point set in May.

The ten-year Treasury yield of the US also rose by 2.7 basis points as buyers go for the 4-year low. It was marked in the month of May close to 3.20%. 

Going forward, the sparse European calendar before Wednesday’s FOMC might pressure the EUR/USD price. The same effect is equally expected from the anxiety that currently pervades the market.

The CME Fed tool reveals there is a 26.8% possibility for a 75 basis point rate increase by the Federal Reserve this June. It gives signs of increased hope and fears of possible disappointments at the same time.