EUR/USD reclaims 1.0900 after a V-shape recovery inspired by weak US Manufacturing PMI

• EUR/USD has reclaimed the 1.0900 resistance after a V-shape recovery amid the risk-on mood.
• Weak US Manufacturing PMI data has advocated the need for an early pause in the Fed’s policy-tightening spell.
• US Manufacturing PMI has registered a fifth straight figure below 50.0.

The EUR/USD pair has recaptured the round-level resistance of 1.0900 in the early Asian session. The major currency pair showed a V-shape recovery after dropping below 1.0800. The rationale behind the bumper recovery in the shared currency pair was the release of the weak United States ISM Manufacturing PMI data, which conveys that the US growth rate is expected to show a crackdown quarterly.

S&P500 settled Monday’s session with marginal gains after a volatile trade as the Federal Reserve (Fed) is expected to pause the policy-tightening spell early to avoid a contraction in the growth rate, portraying a risk-on mood. The US Dollar Index (DXY) reported a vertical fall after a recovery move to near 103.00. The USD Index has reverted to near its weekly low around 102.00 as Fed chair Jerome Powell has to prioritize economic conditions before addressing the stubborn inflation.

Coming back to the US Manufacturing PMI data, the economic data contracted to 46.3 from the consensus of 47.5 and the former release of 47.7. This was the fifth straight figure below 50.0 and a figure of 50.0 acts as a silver line for a growth contraction.

Also, New Orders Index contracted to 44.3 from the expectations of 44.6, which indicates that forward demand is expected to remain subdued. Therefore, the Fed could consider a pause in the policy-tightening spell ahead.

On the Eurozone front, rising inflationary pressures led by a shortage of labor are bolstering the need of more rate hikes from the European Central Bank (ECB). And now fresh rise in the oil price along with expectations of more gains have added fuel to the fire. ECB President Christine Lagarde is expected to continue the rate-hiking spell as a rebound in headline Eurozone inflation is highly anticipated.