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In ahead of US NFP and Eurozone Inflation data, EUR/USD seeks a range break near 1.0600

Alina Haynes

Jan 05, 2023 15:11

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During the Asian session, the EUR/USD pair attempted to break out of the consolidation range it formed above the round-level support of 1.0600. Given the risk-on market mentality, it is expected that the major currency pair will continue its upward trend.

 

In Asia, S&P500 futures are indicating a modest retracement, but the overall risk profile remains sturdy following Wednesday's strong advances. The US Dollar Index (DXY) is languishing below 104.00 and is likely to continue on edge as further reduction of inflation expectations in the United States is expected to keep safe-haven assets under pressure in the short term.

 

According to the Federal Open Market Committee (FOMC) minutes, all Federal Reserve (Fed) policymakers favored a more gradual rate of policy tightening. For Fed members to abandon their hawkish view on monetary policy, greater evidence of inflation moderation is required.

 

According to Reuters, the president of the Minneapolis Fed, Neel Kashkari, emphasized on Wednesday that the Fed must avoid hastily lowering the policy rate and reigniting inflation. In order to attain the inflation target of 2%, he suggested that the interest rate should peak at approximately 5.4% and then remain stable.

 

This week, investors will closely monitor the second catalyst considered by the Federal Reserve when crafting monetary policy. Friday's Nonfarm Payrolls (NFP) are projected to be 200K, a decrease from the previous report's 263K. In addition, investors will pay attention to the Average Hourly Earnings (Dec) data, which is expected to be 5% lower. Given that consumers will continue to have more discretionary spending, a rise in wage expenses may cause the Consumer Price Index to grow (CPI).

 

Investors anticipate the release of the Eurozone's Harmonized Index of Consumer Prices (HICP) on Friday. According to the consensus, the headline HICP is projected to decrease from 10.1% to 9.7%. Consensus has diminished as a result of falling energy prices and the government's one-time reimbursement of family energy expenses. Certainly, the European Central Bank (ECB) will be fascinated by this in the future.

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