EUR/USD climbs to 2-week highs past-1.0450

• EUR/USD starts the week in a positive fashion well above 1.0400.
• The dollar trades on the defensive amidst lower US yields.
• ECB’s C.Lagarde will speak later in the session on Monday.

The weak note in the greenback allows EUR/USD to advance further north of the 1.0400 mark and clinch fresh 2-week peaks on Monday.

EUR/USD firmer on weak dollar, looks at Lagarde

EUR/USD resumes the upside and leaves behind Friday’s retracement on the back of the so far pronounced pullback in the dollar, which is also accompanied by declining US yields across the curve.

Still around the money market, the German 10-year bund yields slip back below the key 2.0% mark, in line with their American peers.

Earlier on Monday, ECB Board member Knot reiterated that underlying inflation trends are worrisome, at the time when he hinted at the likelihood of potential negative economic growth in the last quarter.

Moving forward, Chair Lagare is due to speak before the European Parliament later on Monday.

Across the pond, the Dallas Fed Manufacturing Index will be the sole release in the docket seconded by the speech by New York Fed J.Williams.

What to look for around EUR

EUR/USD remains firm and manages to surpass once again the 1.0400 hurdle on the back of some renewed weakness in the dollar amidst alternating risk appetite trends.

In the meantime, the European currency is expected to closely follow dollar dynamics, the impact of the energy crisis on the region and the Fed-ECB divergence. In addition, markets repricing of a potential pivot in the Fed’s policy remains the exclusive driver of the pair’s price action for the time being.

Back to the euro area, the increasing speculation of a potential recession in the bloc emerges as an important domestic headwind facing the euro in the short-term horizon.

Key events in the euro area this week: ECB Lagarde (Monday) - EMU Final Consumer Confidence, Economic Sentiment, Germany Flash Inflation Rate (Tuesday) - Germany Unemployment Rate, Unemployment Change, EMU Flash Inflation Rate (Wednesday) - Germany Retail Sales, ECB General Council Meeting, Germany/EMU Final Manufacturing PMI, EMU Unemployment Rate (Thursday) - ECB Lagarde, Germany Balance of Trade (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.56% at 1.0442 and faces the next up barrier at 1.0481 (monthly high November 15) ahead of 1.0500 (round level) and finally 1.0614 (weekly high June 27). On the flip side, a breach of 1.0222 (weekly low November 21) would target 1.0032 (100-day SMA) en route to 0.9935 (low November 10).