EUR/USD eyes 1.0700 as ECB expects no calm in rates amid higher German Inflation

• EUR/USD is aiming to reclaim the 1.0700 resistance as the risk-off mood has faded.
• The Fed needs not to be in a hurry to calm down the policy-tightening spell.
• A rebound in German inflation has bolstered the case of 50 bps rate hike continuation.

The EUR/USD pair has turned sideways after failing to recapture the round-level resistance of 1.0700 in the late New York session. The major currency pair is expected to recapture the aforementioned resistance as the risk-off mood has faded after hopes of recovery in China post the release of the Caixin Manufacturing PMI overshadowed the risk of a global recession.

S&P500 settled Wednesday’s session with some losses after Federal Reserve (Fed) policymakers sounded hawkish while delivering guidance on interest rates. The US Dollar Index (DXY) has retreated to near 104.00 after failing to extend recovery above 104.20, portraying mix market mood. Meanwhile, the demand for US government bonds remained extremely weak, which led to a jump in the 10-year US Treasury yields to 4%.

Atlanta Fed President Raphael Bostic expected the central bank to push the terminal rate to the 5.00%-5.25% range as the United States Consumer Price Index (CPI) is extremely sticky. Apart from that, the Fed policymaker expects the central bank to keep the elevated terminal rate stable well into 2024.

Meanwhile, the release of the US ISM Manufacturing PMI gamut claimed that the inflationary pressures have rebounded and the Fed should not be in a hurry to calm down the policy tightening spell. The Manufacturing PMI remained contracted consecutively for the fourth time amid higher rates by the Fed. The economic data landed at 47.7, lower than the consensus of 48.0.

However, the forward demand looks extremely solid as New Orders Index jumped to 47.0 from the expectations of 43.7 and the former release of 42.5.

On the Eurozone front, stronger-than-anticipated German Harmonized Index of Consumer Prices (HICP) cleared that the road towards achieving price stability for the European Central Bank (ECB) is full of troubles. The German HICP climbed to 9.3% from the estimates of 9.0% and the former release of 9.2%. ECB President Christine Lagarde has already announced that the central bank is looking to hike interest rates further by 50 bps in its March monetary policy.