EUR/USD has subsided back to sub-1.1000 levels for a second successive session having again been unable to break above its 21-Day Moving Average which currently resides near the 1.1050 mark. At current levels in the 1.0980s, the pair is trading lower by about 0.4% on the session and eyeing a test of weekly lows posted on Tuesday in the 1.1060 area, as traders digest the latest batch of commentary from Fed policymakers. Cleveland Fed President Lorretta Mester become the latest of a growing throng of FOMC members to announce support for potential 50bps rate hikes at upcoming meetings and FX strategists think the ongoing hawkish shift in market expectations for Fed tightening in the coming year is providing ongoing support to the US dollar.
Energy prices have also turned higher amid fiery rhetoric from Russian Foreign Minister Sergey Lavrov and further signs that Russo-Ukrainian peace talks are at a deadlock, coupled with fears about Russian exports. This is weighing on the euro and contributing to its relative underperformance on Wednesday versus most of its G10 peers. Coming up, Fed speakers remain in focus for the rest of the week and further hawkish leanings could continue to weigh on EUR/USD, perhaps tilting it towards last week’s near-1.0900 lows. Eurozone and US flash March PMIs will also be in focus on Thursday and will give an early insight as to how the Russo-Ukraine war has impacted business sentiment.
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