EUR/USD starts week subdued at 1.1450 level as traders eye upcoming US data, Fed speak, Fed chair nomination

• FX markets are starting the week in subdued fashion, with EUR/USD flat around 1.1450 and well within recent ranges.
• This week’s fundamental drivers are likely to come from the US rather than the EU.

FX markets are starting the week in a contained fashion, with EUR/USD having so far this Monday respected last Friday’s 1.1430-1.1460ish range very well. The pair is currently trading flat and is pretty much bang on the 1.1450 mark. To the upside, key resistance is at 1.1500 and then 1.1520, while to the downside, there is support at 1.1420 and then 1.1350.

This week's drivers

The main drivers of the EUR/USD this week are likely to be US rather than Eurozone related fundamental catalysts; Monday sees the release of the NY Fed’s November Manufacturing survey, ahead of the October Retail Sales and Industrial Production reports on Tuesday and then the Philadelphia Fed’s November Manufacturing survey on Thursday alongside weekly jobless claims. There is also a heavy slate of Fed speak, with the main focus on how Fed policymakers respond to recent inflation developments – chatter is growing amongst market participants that the Fed will need to accelerate the pace of QE tapering in Q1 2022 and bring forward rate hikes. There is also the question of who will be nominated as the next Fed Chair. A WSJ report suggested that US President Joe Biden’s recent interview with current Fed Board of Governors member Lael Brainard went better than expected and that he could make a decision on the Fed chair nomination as soon as this week.

Meanwhile, the euro has largely ignored trade data released on Monday morning, which showed the bloc’s trade surplus coming in at EUR 7.3B in September, a little larger than the EUR 6.5B forecast, as well as inconsequential remarks from ECB President Christine Lagarde, who refused to comment on the appropriateness of rate hikes in 2023. There is very little by way of tier 1 data out of the Eurozone for the rest of the week, while ECB speak is not expected to deliver any surprises.

Capital Economics thinks that Tuesday’s second estimate of Q3 GDP “should confirm that that euro-zone GDP grew by 2.2%”. “But with daily Covid infections now having risen to the highest level since April and showing little sign of slowing” adds the economic consultancy, “there is evidence that consumers are becoming more cautious”. Recent lockdown announcements in various Eurozone nations will not help this and negative revisions for Q4 2021/Q1 2022 European growth forecasts could be forthcoming, creating some downside risks for the euro.