EUR/USD refreshes day’s high above 1.0930 as USD Index eyes further correction, US Inflation eyed

• EUR/USD has printed a fresh four-day high at 1.0935 as US Dollar corrects sharply ahead of US Inflation.
• Anticipation of the quick softening of US inflation has weighed heavily on the USD Index.
• The ECB would continue hiking rates as Eurozone inflation is extremely persistent.

The EUR/USD pair has printed a fresh four-day high at 1.0935 in the Asian session. A sell-off in the US Dollar Index (DXY) on expectations that the United States inflation will decelerate quickly has bolstered bullish bias for the major currency pair. The USD Index has refreshed its day’s low at 102.02 and is expected to extend correction further as commentaries from Federal Reserve (Fed) policymakers have infused fresh blood into the risk-sensitive currencies.

S&P500 futures have continued to remain sideways as investors are awaiting some cues from the upcoming quarterly result season, indicating a quiet market mood. As per Refinitiv estimates, S&P500 are expected to report shrinkage in profits by 5.2% vs. a growth forecast of 1.4% anticipated at the start of the year. The downgraded forecast for S&P500 is backed by higher rates from the Fed and tight credit conditions from US commercial banks, which have squeezed advances to firms.

The USD Index is likely to be guided by the inflation data. Analysts at NBF expect “The energy component may have had a negative impact on the headline index as prices likely fell in both the gasoline and natural gas segment. Expected gains for shelter and used vehicles could still result in a 0.2% monthly increase in headline prices. The core index, for its part, could have increased 0.4% MoM, which would translate into a one-tenth increase in the annual rate to 5.6%.”

On the Eurozone front, weak Retail Sales data have failed to impact the decision of further rate hikes from the European Central Bank (ECB). monthly Retail Sales contracted by 0.8% as expected by investors. And, annual Retail Sales contracted by 3.0% while the street was anticipating more contraction to 3.5%. ECB Governing Council member Francois Villeroy de Galhau warned that “Inflation is becoming more prevalent and potentially more persistent.” He further added, “The impact of rate hikes will be amplified in the coming months.”