EUR/USD cuts weekly losses, reclaims the 1.1300 figure as the greenback weakens

• EUR/USD sellers, take a breather before resuming another leg-down in the pair.
• EUR/USD recovered amid greenback weakness across the board, blamed on lower US bond yields.
• ECB’s members reinforced the dovish monetary policy stance by the central bank.

The euro trims some weekly losses in the day, gains 0.04%, trading at 1.1318 during the New York session at press time. The shared currency recovers some ground after dipping to a new year-to-date low around 1.1263, mainly driven by US dollar strength as the US T-bond benchmark note rose close to 1.65%, but as of writing, clings to 1.60% falling almost five basis points.

Meanwhile, the US dollar seems to be affected by falling yields. The US Dollar Index (DXY), which measures the greenback’s performance against a basket of six rivals, slides 0.12%, down to 95.79, retreating from 16-months highs, near the 96.00 figure.

The weakening of the US dollar comes despite that the Federal Reserve is tightening its monetary policy. Further, money market futures have fully priced in a rate hike by July of 2022 and increased the odds of another adjustment to the US interest rate by the end of 2022. Therefore, Wednesday’s move could be viewed as a correction before resuming the undergoing downtrend.

Data-wise, in the Eurozone, inflation for October rose by 4.1% on a yearly basis, in line with expectations. The month-over-month reading, which significantly moves the pair, came at 0.8%, also in line with estimations, though it failed to trigger any reaction in the EUR/USD.

Across the pond, the US dollar economic docket features housing data. Building Permits for October rose to 1.65M, higher than the 1.638M expected by analysts. Contrarily, Housing Starts for the same period slowed their pace to 1.52M, lower than the 1.576M foreseen.

ECB policymakers expressions about Eurozone CPI above 4% 

Once Eurozone CPI data was known, some policymakers crossed the wires. Olli Rehn, an ECB Governing Council Member, said that the price pressures would ease in the next year. In the same tone, Bruno Le Maire, French Finance Minister, reinforced the “temporary” thesis, saying that it is transitory, but added, “we need to remain vigilant on this.”

Contrarily, adopting a more neutral stance, ECB Governing Council Member and head of the National Bank of Belgium Pierre Wunsch said that “all of us need to be patient, but we shouldn’t exclude that the inflationary forces are quite strong and at some point will require a reaction.”