EUR/USD loiters around 1.1550 on USD strength, dovish ECB

• EUR/USD recovers initial losses on Tuesday in the Asian session.
• The US Dollar Index hovers at a one-year high near 94.40.
• Fed’s tapering, EU on higher energy prices, ECB mixed response weighs on the euro.

The EUR/USD pair has been tracking minor gains in the Asian session on Tuesday. The pair for the past two sessions moving in a range of 1.1540 and 1.1580 with limited price action. At the time of writing,  EUR/USD is trading at 1.1558, up 0.05% for the day.

The US Dollar Index (DXY), which tracks the performance of the greenback against the six majors remains at a one-year high of around 94.40, which keeps EUR/USD gains limited.

The strong buying pressure in the greenback pushed EUR/USD below 1.1600 the lowest level since July 2020. Investors stay invested in the buck amid expectations for a tapering of Federal Reserve stimulus that could begin as soon as November and a possible interest rate hike in late 2022, despite disappointing NFP data released on Friday.

On the other hand, the shared currency remains depressed amid mounting inflationary concerns due to rising energy prices. Nevertheless, the European Central Bank (ECB) Chief Economist Philip Lane shrugged off the recent bout of inflation as a trigger for monetary policy. In addition to that, the ECB Governing Council member Yannis Stournaras dismissed the theory of rising energy prices and ultimately the rate hike in near future due to higher inflation. The dovish outlook of the central bank while Fed and BOE signals at probable rate hike weigh negatively on the prospects of the euro.

Meanwhile, China’s President Xi Jinping and the European Union (EU) Council President Charles Michel would be having a probable telephone conversation on October 15.

As for now, traders are waiting for the German Wholesale Price Index, Eurozone ZEW Economic Sentiment Index and US JOLTS Job Opening data to gain fresh trading impetus.

EUR/USD additional levels