EUR/USD sent onto the backfoot as end of month flows kick-in on Wall Street

• EUR/USD bears on board into the final stretch on Wall Street. 
• US stocks are sinking ahead of earnings this week and major calendar events such as the ECB, Fed and US NFP.

EUR/USD has been sent onto the backfoot as US stocks slide to fresh session lows led by the tech-focused Nasdaq which is down by more than 1% on Monday. At the time of writing, EUR/USD is losing around 0.2% and dropped from a high of 1.0913 to a low of 1.0839 recently printed. 

It's a big week ahead and the markets are squaring up before major events such as the Federal Reserve, European Central Bank and the US nonfarm, Payrolls as the showdown and grand finale. Firstly, the Federal Reserve has been price din by the markets for a 25 basis point hike but they are also factoring in a benchmark rate to peak at 4.93% in June, up from 4.33% now. there are also calls for the central bank to cut it to 4.52% by December. However, some analysts are of the mind that the market is wrong considering how tight the labour market is. Some Fed officials have been pushing back against market calls for a pivot and said that they will need to keep rates in restrictive territory for a period of time in order to bring down inflation. 

ECB will be key

As for the ECB, markets have been starved of comments from ECB officials in recent times and there has not been much in the way of data to go by either,. Instead, the sentiment is for a 50 basis point hike followed by hawkish commentary from governor Christine Lagarde. '' There is room for things to get interesting during the press conference,'' analysts at TD Securities argued, adding ''and here we think Lagarde will sound more hawkish than expected and repeat her earlier guidance of possibly further 50bps hikes in March and May.''

Analysts at Danske Bank ultimately see the ECB's terminal rate at 3.25% in May but argued that risks remain tilted to the upside. They note also that the January Flash HICP figures will be released just ahead of the meeting on Wednesday. ''We look for an uptick both in the headline (9.6%; from 9.2%) and core (5.4%, from 5.2%) terms.''

The grand finale will come with the US Nonfarm Payrolls on Friday whereby the consensus sees 185k jobs added vs. 223k in December, as analysts at Brown Brothers Harriman said, explaining that the Unemployment Rate is seen up a tick to 3.6% and average hourly earnings at 4.3% YoY vs. 4.6% in December.  ''All in all, the labour market remains tight and it’s hard to see how wage pressures can fall that much further given this tightness,'' the analysts argued.