Market news
17.03.2023, 09:46

EUR/USD remains bid and climbs to 2-day highs near 1.0670

  • EUR/USD revisits the 1.0660/70 band on Friday
  • The greenback extends the corrective decline amidst risk-on mood.
  • EMU Final inflation figures next of note in the euro docket.

The optimism around the European currency – and the risk complex in general – remains well and sound on Friday and now lifts EUR/USD to the 1.0665/70 band, or 2-day highs at the end of the week.

EUR/USD stronger on USD-selling, risk appetite improvement

EUR/USD advances for the second session in a row and keeps the upbeat tone well in place in the second half of the week against the backdrop of a firmer recovery in the appetite for the risk-associated assets.

Indeed, recent positive news surrounding the US and European banking sectors helped mitigate concerns over a potential banking crisis, putting to rest at the same time bouts of risk aversion.

Following Thursday’s hike by the ECB, Board member Simkus suggested that the terminal rate has not been reached yet, while his colleague Villeroy noted that inflation in the euro area should be around 3% at some point by year end.

Later in the domestic calendar comes the final inflation figures in the Euroland, whereas Industrial Production, Manufacturing Production, the CB Leading Index and the preliminary Michigan Consumer Sentiment are all due across the Atlantic.

What to look for around EUR

EUR/USD manages to leave behind some of the recent weakness and retakes the 1.0600 hurdle and above at the end of the week.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB in a context still dominated by elevated inflation, although amidst dwindling recession risks.

Key events in the euro area this week: EMU Final Inflation Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst dwindling bets for a recession in the region and still elevated inflation. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is advancing 0.36% at 1.0646 and the breakout of 1.0759 (monthly high March 15) would target 1.0804 (weekly high February 14) en route to 1.1032 (2023 high February 2). On the other hand, the next support emerges at 1.0516 (monthly low March 15) seconded by 1.0481 (2023 low January 6) and finally 1.0324 (200-day SMA).

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