EUR/USD sinks to four-week lows below 1.0900 amidst robust US Dollar

• EUR/USD drops to 1.0916 as US PPI data slows and unemployment claims rise, strengthening the US Dollar.
• US Treasury bond yields fall with investors pricing in three rate cuts by the Federal Reserve by December 2023.
• ECB speakers emphasize slowing inflation in the Eurozone, with further rate hikes left on the table.

EUR/USD enjoyed an upbeat beginning of the week, but Thursday’s session sent the EUR/USD pair plummeting to new four-week-lows at around 1.0899. The main reason for a strong US Dollar (USD) amidst falling US bond yields as inflation data continues to slow down, while a rise in unemployment claims suggests the labor market is easing. The EUR/USD is trading at 1.0916, nearly the weekly lows, down more than 0.50%.

Slowing inflation and an easing labor market fuel greenback’s surge, dragging EUR/USD down 0.50%

The US Department of Labor revealed inflation data on the producer side, known as the Producer Price Index (PPI) for April, with headline and core PPI slowing 0.01% lower in yearly data, while monthly readings in both cases stood at 0.4%. Although data was negative for the US Dollar and positive for the Euro (EUR), traders booked profits per the EUR/USD reaction; simultaneously, the pair sank below the 20-day EMA, sitting at 1.0972.

In other data, Initial Jobless Claims climbed above the 245K estimates for the week ending May 6 and rose by 264K, as the Minnesota Fed President Neil Kashkari crossed newswires. He said that albeit inflation is cooling, it remains stickier. He added, “We will have to keep at it for an extended period.”

After the data release, US Treasury bond yields edged lower as investors began to price three 25 bps rate cuts by the US Federal Reserve toward the December 2023 meeting, according to the CME FedWatch Tool. The US 2s and 10-year bond yields continued to register losses of one and a half bps, respectively, at 3.897% and 3.386%, respectively.

On the Eurozone (EU) front, European Central Bank (ECB) speakers continued to stress that inflation is slowing down, as ECB de Cos commented that the EU’s central bank is closed to its final cycle of hiking interest. The ECB’s Vice-President De Guindos echoes de Cos’ comments on inflation but leaves the door open to further rate hikes.

Upcoming events

The Eurozone economic docket will feature inflation data in France, and Spain, alongside Germany’s Current Account. ECB’s Luis De Guindos will cross newswires. On the US front, the University of Michigan Consumer Sentiment, alongside Federal Reserve speakers.

EUR/USD Technical Levels