EUR/USD stabilizes near mid-1.0800s after setting weekly low

• EUR/USD has gone into a consolidation phase near 1.0850.
• The risk-averse market environment and rising bond yields help USD gather strength.
• March inflation data from the US will be the next market driver.

EUR/USD started the new week on the back foot and touched its lowest level in a week at 1.0830 in the American session. The pair was last seen trading a few pips below 1.0850, losing 0.5% on a daily basis.

Hawkish Fed bets lift USD

Following the three-day weekend, Wall Street's main indexes opened in negative territory on Monday and helped the US Dollar find demand as a safe haven.

The March jobs report from the US, which showed that the Unemployment Rate declined to 3.5% with an increase of 236,000 in Nonfarm Payrolls (NFP), seems to have brought back hawkish Fed bets, providing an additional boost to USD. According to the CME Group FedWatch Tool, markets are currently pricing in a 72% probability of the Fed raising its policy rate by 25 basis points in early May.

Furthermore, the Federal Reserve Bank of New York's monthly consumer survey revealed that the one-year inflation expectation climbed to 4.7% from 4.2% in March's survey.

Earlier in the day, European Central Bank (ECB) policymaker Pablo Hernandez de Cos said that core inflation in the Eurozone was expected to remain elevated in the rest of the year and added that they have "ground to cover" in terms of policy. These comments, however, failed to help the Euro stay resilient against the USD.

Eurostat will release March Retail Sales data on Tuesday. More importantly, the US Bureau of Labor Statistics will publish the Consumer Price Index (CPI) data on Wednesday, which could have significant implications on the Fed's rate outlook and the USD's valuation.

Technical levels to watch for