EUR/USD declines towards 1.0440 as focus shifts to ECB Lagarde’s speech

• EUR/USD is eyeing more weakness towards 1.0440 as investors have underpinned the risk aversion theme.
• Expectations for a higher interest rate peak have triggered recession fears in the United States economy.
• Investors are awaiting ECB Lagarde’s speech for fresh impetus.

The EUR/USD pair has turned sideways after dropping vertically to near 1.0465 in the early Tokyo session. The major currency pair has extended its losses after dropping below the critical support of 1.0480 and is expected to deliver more weakness to near 1.0440 as the risk-off impulse has escalated amid a firmer US Dollar.

The US Dollar Index (DXY) is hovering around Friday’s high at 105.60 after overstepping the critical hurdle of 105.50. The US Dollar is expected to witness more demand as investors have underpinned safe-haven assets amid the risk-aversion theme. Meanwhile, S&P500 witnessed a sell-off on Tuesday as a higher interest rate peak by the Federal Reserve (Fed) could trigger a recession in the United States.

The returns on US Treasury bonds failed to keep the upside momentum and dropped as expectations of a decline in interest rate hike pace by the Fed are extremely solid. The 10-year US Treasury yields have declined to near 3.53%.

Surprise rise in the US service sector and November’s employment report have cleared that inflation is here to stay for a while as demand has not slowed down yet. The road to 2% inflation is far from over, therefore, the Fed is bound to hike the interest rate further but with less velocity this time.

On the Eurozone front, investors are keeping an eye on the speech from European Central Bank (ECB) President Christine Lagarde, which is scheduled for Thursday. The speech from ECB President will provide cues about the likely monetary policy action in December. Meanwhile, a surprise rise in Factory Orders in Germany has indicated that demand is returning despite accelerating interest rates.