EUR/USD drops after the test of previous week’s high above 1.0650 despite risk-on mood

• EUR/USD has slipped after testing the previous week’s high around 1.0660, however, the upside is still favored.
• The deadly due of higher interest rates and lower prices for goods at factory gates will impact US CPI vigorously.
• Russia is ready to resume gas supplies to Europe through the Yamal-Europe pipeline.

The EUR/USD pair has witnessed a steep fall in the Asian session after testing the previous week’s high around 1.0660 despite the solid risk appetite theme in the global market. The major currency pair has dropped to near 1.0630, however, the upside bias in the asset has not been ruled out as the overall context is still positive and it could be a minor correction before a bullish storm.

S&P500 futures have added more gains after a revival move on Friday. The US equities seem comfortable after a decline in the United States Personal Consumption Expenditure (PCE) Price Index data. Meanwhile, the US Dollar Index (DXY) is struggling to overcome the opening pain as it dropped firmly below 103.75. The 10-year US Treasury yields have slipped to near 3.73%.

The US Dollar Index is facing immense pressure despite a lower-than-anticipated decline in the US PCE Price Index data. The headline PCE dropped to 5.5% while the street was expecting a drop to 5.3%. While the core PCE remained in line with the estimates of 4.7%.

The extent of a decline in the consumption expenditure by households is going to force manufacturers to trim the prices of goods and services to maintain equilibrium in the demand-supply mechanism. Then, the deadly duo of higher interest rates and declining price index by the producers at factory gates will have a sheer impact on the Consumer Price Index (CPI) gamut.

On the Eurozone front, gas issues will ease in the Eurozone as Russia is ready to resume gas supplies to Europe through the Yamal-Europe pipeline, Russian Deputy Prime Minister Alexander Novak told state TASS news agency,” reported Reuters.

European Central Bank (ECB) Governing Council member, as well as Dutch Governor, Klaas Knot sees more policy tightening in the five policy meetings between now and July 2023 and has warned that ‘The risk of us doing too little is still the bigger risk’.