EUR/USD pares weekly losses near 1.1150 with eyes on German GDP, US PCE inflation

• EUR/USD licks its wounds at the lowest levels in 20 months, recently easing from intraday high.
• Markets remain lackluster amid mixed concerns over Russia-Ukraine and softer start to Friday.
• ECB’s Kazimir expects near-term increase in inflation, improvement in German Consumer Confidence teases ECB hawks ahead of key GDP.
• US Q4 GDP jumped, inflation expectations gained but PCE Price Index awaited.

EUR/USD hovers around 1.1150 during a sluggish Friday morning as markets take a breather following the heavily volatile session post-Fed.

In doing so, the major currency pair rebounds from the lowest levels since May 2020, flashed the previous day, also snapping the four-day downtrend. Even so, the quote braces for the biggest weekly fall since mid-June 2021.

That said, the market’s latest indecision could be linked to the cautious mood ahead of preliminary readings of German Q4 GDP, expected -0.3% versus +1.7% prior, as well as the US Core PCE Price Index figures for December, forecast +4.8% YoY versus 4.7% prior.

It should be noted that the mixed concerns over the fears of Russia’s invasion of Ukraine and associated risks to the bloc also probe the EUR/USD traders. At the latest, US President Joe Biden talked with his Ukrainian counterpart Volodymyr Oleksandrovych Zelenskyy while showing readiness to offer more economic support.

Amid these plays, the benchmark US 10-year Treasury yields stay firmer around 1.81%, after declining the most in a month the previous day whereas the S&P 500 Futures also print mild gains around 4,330 by the press time.

On Thursday, the German GfK Consumer Confidence Survey showed improvement in the final figure of -6.7, versus -7.8% expected and -6.9 prior. Elsewhere, Advance Q4 US GDP rose 6.9% annualized versus 5.5% market consensus and 2.3% prior. On the same line was the US Initial Jobless Claims for the week ended in January 21that came in 206K compared to 260K expected and 290K previous. Further, the US Durable Goods Orders for December dropped by -0.9% for December, below -0.5% market consensus.

Looking forward, the initial readings of German GDP will help the ECB hawks, especially from Bundesbank. Though, the EUR/USD buyers have a long way to go.

Read: US PCE Inflation Preview: Dollar rally has more legs to run

Technical analysis

A clear downside break of the June 2020 swing low near 1.1165 directs EUR/USD prices towards an early May 2020 high of 1.1018. Also acting as an upside filter is the year 2021 bottom surrounding 1.1185.