EURUSD sees an upside above 1.0200, investors await US long-term inflation report

• EURUSD is eyeing more gains above 1.0200 amid an upbeat risk impulse.
• An increment in long-term inflation expectations might spoil the market mood.
• ECB Schnabel believes that only a deep recession with a sharp rise in unemployment would dampen inflation.

The EURUSD pair is hovering around the immediate hurdle of 1.0200 in the Tokyo session. The asset is displaying topsy-turvy moves after Thursday’s juggernaut rally and may resume its upside journey after surpassing the 1.0200 hurdle decisively. Bullish bets are accelerating for the Euro bulls as the risk profile is holding optimism.

The US dollar index (DXY) has witnessed a less-confident pullback after dragging to near a two-month low of around 107.70. The DXY is expected to conclude its pullback move sooner as bets over the continuation of 75 basis points (bps) rate hike pace are vanishing. S&P500 futures have displayed a minor correction but that doesn't warrant a reversal. The 10-year US Treasury yields are capped at around 3.81%.

After successfully passing October’s short-term inflation report, the US economy has to go through a litmus test of long-term inflation expectations. Federal Reserve (Fed) has been consoling market participants by reiterating that long-term inflation expectations are well-anchored at around 2% and annual inflation is a short-term pain, which can be contained through accelerating interest rates and balance sheet reduction. Previously, the economic data landed at 2.9%.

Investors should be aware that US markets will remain closed on Friday on account of Veterans Day.

On the Eurozone front, European Central Bank (ECB) Governing Council member Isabel Schnabel cited that only a deep recession with a sharp rise in unemployment would dampen inflation but this is unlikely now." The ECB won’t look for a pause in the monetary policy as inflation expectations are broadly anchored.