EUR/USD fades the earlier advance to 1.1090 ahead of ECB

• EUR/USD gives away initial gains to the vicinity of 1.1100.
• The ECB is expected to hike rates by 25 bps later on Thursday.
• Germany, EMU final Services PMI remain firm in April.

EUR/USD now erodes part of the recent upbeat tone and retreats to the mid-1.1000s following an earlier fruitless attempt to test 1.1100 the figure in the wake of the opening bell in Euroland on Thursday.

EUR/USD now looks at ECB, Lagarde

EUR/USD so far fails to advance for the third consecutive session on Thursday and comes under pressure near 1.1050 prior to the key ECB event due later in the session.

On this, the central bank is seen hiking the policy rate by 25 bps, although a larger rate raise (50 bps?) is not completely off the table, as per hawkish messages from rate setters and the persistently elevated inflation.

In the meantime, the German 10-year Bund yields set aside two sessions in a row with losses and attempt a mild rebound to the proximity of the 2.30% area.

In the euro calendar, final Services PMIs in Germany and the euro area came at 56.0 and 56.2, respectively, for the month of April. In the US, Balance of Trade results are due seconded by usual weekly Jobless Claims.

What to look for around EUR

EUR/USD’s upside momentum keeps gathering pace and now shifts the attention to the 2023 high near 1.1100 the figure amidst persistent dollar weakness and prudence ahead of the ECB meeting.

Meanwhile, price action around the single currency should continue to closely follow dollar dynamics, as well as the Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.

Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: Germany Final Services PMI, EMU Final Services PMI, ECB Meeting, ECB Lagarde press conference (Thursday) – Germany Construction PMI, EMU Retail Sales.

Eminent issues on the back boiler: Continuation (or not) of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is down 0.05% at 1.1054 and faces the next support at 1.0941 (monthly low May 2) followed by 1.0909 (weekly low April 17) and finally 1.0831 (monthly low April 10). On the other hand, the surpass of 1.1095 (2023 high April 26) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022).