EUR/USD consolidates sub-1.1000 ahead of more US data/Fed speak as geopolitics continue to weigh

• EUR/USD is consolidating sub-1.1000 on Tuesday ahead of more US data and Fed speak.
• Geopolitical risk as the EU moves towards tougher restrictions on Russia energy imports plus hawkish Fed rhetoric has weighed recently.

Having slipped back below the 1.1000 level on Monday amid broad euro underperformance as expectations built for further Western sanctions against Russia, EUR/USD has stabilised above recent lows in the 1.0950 area. While geopolitics remains at the forefront of the market’s mind, there is also plenty of US data and Fed speak coming up, with US trade data out at 1330BST ahead of ISM Services PMI at 1500BST. Of particular importance will be remarks from Fed Vice Chairwoman Lael Brainard at 1605BST.

Strategists have noted that its not only geopolitical risks that have driven EUR/USD lower as of late (the pair is now nearly 2.0% lower versus last week’s highs in the upper 1.1100s), but also the ongoing hawkish shift in Fed tightening expectations. US yields largely remain elevated at/near multi-year highs and continue to carry an upside bias amid expectations the Fed will hike interest rates in 50bps intervals at its coming meetings as it seeks to get rates back to so-called “neutral” sooner rather than later.

Should the EU move towards stricter rules on Russian energy imports as seems very likely at this point and should Fed policymakers continue to amp up the hawkish rhetoric, a break lower towards 1.0900 looks to be very much on the cards. EUR/USD’s saving grace might be the recent hawkish shift in ECB tightening expectations, as policymakers talk up the prospect of ending the sub-zero interest rate experiment within a year to respond to rising Eurozone inflation.