The Euro received a solid boost in yesterday’s trading session before giving up most of the gains after the release of better than expected inflation figures and hawkish comments from an ECB board member who noted the European central bank should begin reducing their stimulus program.
Eurozone CPI figures hit the market during yesterday’s European session at 3%, which was above analysts’ expectations for a number of 2.7%, and marks a more than 10 year high, which is leaving some ECB board members a little concerned.
Governing Council member Robert Holzmann, called on Tuesday for a reduction in the emergency bond purchases which were introduced to boost the economy in times of the pandemic as soon as next month while ECB policymaker Klaas Knot said he expected the bank to start reducing the pace of its emergency bond purchases as soon as next week.
The Euro initially hit a high of $1.1850 on the news before giving up the gains towards the end of the trading session which means many in the market are still skeptical about taking long positions again the US dollar over fears of a resurging delta variant of the coronavirus which may once again hit the world economy.
Looking ahead today, the main driver of the EUR/USD currency pair will be the release of the unemployment rate and Markit manufacturing figures from Germany and from the US, we will see the release of Markit manufacturing and ISM manufacturing figures.
The Euro has managed to break a 3 day winning streak early as we enter the European trading session and the EUR/USD currency pair has now pulled back down to the critical support level of $1.1795.
We expect the currency pair today to trade in the consolidated trading range of $1.1795 and $1.1833 as traders remain wary of taking positions ahead of the Non-farm payrolls figure on Friday, which will be a deciding factor on the beginning of the tapering program in the US.