EUR/USD meanders around 1.1400 following a volatile end of the week

• The shared currency ends the week lower, as the EUR/USD is down 0.48% in the week.
• German inflation came as expected, while US UoM Consumer Sentiment fell short of forecasts.
• ECB Lagarde’s pushed back against raising rates, while Fed’s Bullard eyes 1% increases by July 1st.

The EUR/USD seesaws around the 1.1400 figure as European traders get ready for the weekend amid a risk-off market mood. At the time of writing, the EUR/USD is trading at 1.1401.

The Friday session witnessed the EUR/USD fluctuating up and down, with a lack of direction, after some ECB and Fed speaking. Also, during the European session, German inflation figures for January were reported. The German HICP and the CPI increased by 5.1% and 4.9%y/y,  both readings in line with expectations, causing a jump from the daily lows towards 1.1390, a 20-pip jump.

Meanwhile, the US economic docket is light in the North American session, with the University of Michigan Consumer Sentiment Index for February reported at 61.7, lower than the 67.5 estimated and trailed the January 67.2 figure. Concerning inflation expectations for 1 and 5 years, consumers expect it at 5.0% and 3.1%, respectively. 

The EUR/USD bounced on the release towards the 1.1410 area, retreating afterward, and through the remainder of the day, is seesawing around the 1.1400 figure.

Central bank divergence could favor the greenback vs. the euro

Now that the macroeconomic data is in the rearview mirror, some ECB and Fed speaking entertained EUR/USD traders in the last two days. 

On Thursday, ECB President Christine Lagarde said that raising rates would not solve any of the current problems and that they [ECB] don’t want to choke the recovery, and emphasized that she is confident inflation will fall back in the course of the year.

Across the pond, the St. Louis Fed President, James Bullard, on an interview with Bloomberg, said that he favors 1% of rate increases to the Federal Funds Rate (FFR) by July 1st. When asked about a 50 bps increase in the March meeting, he said he does not want to “prejudge that meeting.”

Therefore, the central bank policy divergence could witness some USD strength to the detriment of the EUR. It could be possible that the EUR/USD might be headed to the 1.1250-1.1350 area on a mean reversion reaction once Lagarde’s dovishness got back on the aforementioned headlines.