EUR/USD remains weak and approaches the 1.0900 zone

• EUR/USD sinks to 3-week lows near 1.0910 on Thursday.
• Market participants continue to favour the risk-off space.
• US Producer Prices disappoint in April, Claims rise more than estimated.

EUR/USD’s selling pressure gathers impulse and flirts with the area of 4-week lows near 1.0900 on Thursday.

EUR/USD ignores usual hawkish ECB-speak

EUR/USD debilitates further and revisits levels last seen in mid-April in the proximity of the 1.0900 neighbourhood, always on the back of the intense recovery in the US Dollar and the persevering risk-off environment.

So far, the European currency has practically ignored further hawkish narrative from ECB officials after both C. Lagarde and J. Nagel favoured the continuation of the current tightening bias.

It is worth recalling that Board member M. Kazaks suggested on Wednesday that a rate hike in July might not be the last one amidst the current context of still elevated inflation, an idea that falls in line with speculation of another quarter-point hike in September, which should bring the deposit rate to 4.0%.

In the US calendar, Producer Prices rose less than expected in April: 0.2% MoM and 2.3% YoY. In addition, Initial Jobless Claims increased by 264K in the week to May 6, also more than anticipated.

What to look for around EUR

EUR/USD faces renewed downside pressure in response to the resurgence of the risk aversion and the consequent investors’ move towards the greenback.

The movement of the euro's value is expected to closely mirror the behaviour of the US Dollar and will likely be impacted by any differences in approach between the Fed and the ECB with regards to their plans for adjusting 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: ECB Lagarde, De Guindos, Schnabel (Thursday).

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 losing 0.70% at 1.0902 and faces the next contention level at 1.0900 (round level) seconded by 1.0831 (monthly low April 10) and finally 1.0795 (100-day SMA). On the flip side, 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).