EUR/USD aims to recapture 1.0700 as risk appetite recovers, Fed minutes in focus

• EUR/USD is looking to reclaim 1.0700 amid a recovery in the market mood.
• The USD Index has refreshed its day’s low at 103.58 as the geopolitical tensions-inspired volatility has faded away.
• Goldman Sachs expects the Fed to raise interest rates three more times this year.

The EUR/USD pair has attempted a recovery after dropping to near 1.0673 in the early European session. The major currency pair is looking to reclaim the round-level resistance of 1.0700 as the risk aversion theme has lost its traction. Investors have ignored the US-China tensions and North Korea’s missile attacks near Japan’s Exclusive Economic Zone (EEZ) region. However, the United States (UN) Securities Council is holding a meeting to discuss North Korea’s action after Japan urged the former.

S&P500 futures have recovered their entire losses despite volatility ahead of Monday’s holiday on account of Presidents’ Day. The 500-US stocks basket ended the week on a mixed note as investors digested renewed fears of inflation recovery. Meanwhile, the US Dollar Index (DXY) has refreshed its day’s low at 103.58 as the geopolitical tensions-inspired volatility has faded away. The USD Index is looking to test Friday’s low around 103.50.

For further guidance, investors have shifted their focus toward the release of the Federal Open Market Committee (FOMC) minutes, which will release on Wednesday. The market participants will keenly watch for the inflation projections and cues related to March’s monetary policy.

Considering the fresh rise in January’s Retail Sales data, the Federal Reserve (Fed) is expected to remain hawkish ahead and might push interest rates to 5% region. A recovery in consumer spending could be offset by restrictive monetary policy. A note from Goldman Sachs states the investment banking firm expects the U.S. Federal Reserve to raise interest rates three more times this year, lifting their estimates after data pointed to persistent inflation and a resilient labor market, as reported by Reuters.

On the Eurozone front, investors are focusing on the S&P Global PMI numbers, which will release on Tuesday. The Manufacturing PMI is seen higher at 49.3 against the former release of 48.8. While the Services PMI is expected to improve to 51.1 from the prior release of 50.8.