EUR/USD: Set to refresh 13-month high as DXY renews one-year low on soft US inflation

• EUR/USD remains firmer at the highest levels since March 2022, up for the fourth consecutive day.
• US Dollar Index (DXY) slips beneath 100.80 yearly low as softer yields strength bearish bias about the greenback.
• US PPI also disappoints Fed hawks and signal nearness to Fed’s policy pivot.
• Hawkish ECB talks, upbeat Eurozone data add strength to the upside momentum ahead of more inflation clues.

EUR/USD bulls hold the reins tightly at a 13-month high as a softer US Dollar joins hawkish hopes from the European Central Bank (ECB) during early Friday in Europe. That said, the Euro pair recently renewed the multi-day high to 1.1075, making rounds to 1.1065-70 by the press time. 

With this, the US Dollar Index (DXY) slides beneath the lowest level of 2023 marked in February as the greenback bears attack the 100.80 level, around 100.85 at the latest.

While tracing the top-tier catalysts, hopes of sooner winding down of the hawkish Fed policy, backed by softer US inflation numbers and dovish Fed Minutes, gain major attention of the EUR/USD buyers. That said, the US Producer Price Index (PPI) for March dropped to a four-month low of -0.5% MoM versus 0.0% expected and prior. Further, the PPI YoY also declined to 2.7% from 4.9% in previous readouts, versus market forecasts of 3.0%. Additionally weighing on the hawkish Fed bets and the US Dollar is the US Initial Jobless Claims figure as it rose to 239K versus 232K expected and 228K prior.

On the other hand, Eurozone Industrial Production rose 1.5% MoM in February versus 1.0% expected and 0.7% prior. Further, the yearly figure was also impressive as it rose 2.0% YoY during the stated month compared to 1.5% analysts’ estimations and 0.9% previous readings.

Not only divergence between the Eurozone and the US data but the monetary policy signals from the European Central Bank (ECB) and the Federal Reserve (Fed) also exert downside pressure on the US Dollar and propel the EUR/USD price.

Furthermore, the recent retreat in the US Treasury bond yields, after the previous day’s corrective bounce, also weighs on the US Dollar and allow the EUR/USD to rush towards the fresh multi-month high. With this, the US 10-year and two-year Treasury bond yields retreat to 3.44% and 3.96% in that order.

Moving on, the final readings of the Eurozone inflation numbers may entertain EUR/USD traders. However, major attention will be given to the US Retail Sales for March, the Michigan Consumer Sentiment Index (CSI) for April and the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations will be important to watch for clear directions.

Technical analysis

Unless falling back below the February 2023 high of around 1.1035, the EUR/USD appears well-set for March 2022 peak surrounding 1.1185.