EUR/USD Faces Volatility: Unsustainable Gains Amidst Economic Indicators and FOMC Influence

EUR: Unsustainable gains

EUR: Unsustainable gains

Yesterday was a volatile session for EUR/USD. Eurozone headline inflation dropped more than expected to 2.9%, but markets might have focused on core staying relatively high at 4.2% by looking at the positive EUR/USD reaction. Anyway, the rally was very short-lived. Above-consensus US employment costs and consumer confidence, Canada entering a technical recession, and sustained USD/JPY demand all prompted a dollar comeback and EUR/USD is now trading closer to its 1.0550 anchor.

Today, the direction of travel for EUR/USD will be set by US data releases first and the FOMC then. As discussed in the USD section above, we might see a dollar correction, but our base case is that it would follow the pattern of the one we saw yesterday, with gains above 1.0650 in EUR/USD proving hardly sustainable.

Most of Europe is on holiday today, so European calendars are quite empty.

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Topics

eur/usd fomc economic indicators eurozone inflation consumer confidence volatility Core Inflation currency markets US employment costs Canada recession USD/JPY demand dollar comeback EUR/USD anchor

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