EUR/USD advances towards 1.1050 as US Dollar begins inflation week on a negative note

• EUR/USD picks up bids to refresh intraday high, extends Friday’s rebound towards multi-month high marked late April.
• US Dollar bears the burden of mixed jobs report, mixed feelings about US debt ceiling and bank crisis.
• Hawkish ECB rate hike contrasts with Fed’s dovish rate lift to propel Euro price.
• ECB’s Knot, Fed’s Bullard praise higher rates, highlighting the importance of US inflation figures.

EUR/USD bulls keep the reins around 1.1040 as it renews intraday high during a sluggish start to the key week, rising 0.15% on a day heading into Monday’s European session. The Euro pair’s latest gains could be linked to the hawkish comments from a European Central Bank (ECB) official, as well as the US Dollar’s broad weakness amid mixed sentiment.

During the weekend, Dutch Central Bank President and ECB board member Klaas Knot said, “ECB interest rate hikes are starting to have an effect, but more will be needed to contain inflation.” On the same line, ECB Governing Council member and Bank of France head Francois Villeroy de Galhau said on Friday that there will likely be several more hikes.

It should be noted that the US Dollar Index (DXY) marks one more attempt to break a three-week-old ascending support line as it drops 0.13% to 101.15 by the press time. The greenback’s latest weakness could be linked to the downward revision of the US Nonfarm Payrolls (NFP), even if the upbeat headline numbers allowed St. Louis Federal Reserve President James Bullard to reiterate bullish bias.

Furthermore, hopes that the US policymakers will be able to tackle looming default fears, ahead of Tuesday’s meeting of US President Joe Biden with the White House with Republican House Speaker Kevin McCarthy, Republican Senate Minority Leader Mitch McConnell and top congressional Democrats to discuss the debt ceiling issue. It’s worth noting that US Treasury Secretary Janet Yellen on Sunday issued a stark warning that a failure by Congress to act on the debt ceiling could trigger a "constitutional crisis" that also would call into question the federal government's creditworthiness, per Reuters.

Elsewhere, recently the upbeat performance of US tech giants joined the mixed feelings surrounding the US banking sector to weigh on the US Dollar amid downbeat Treasury bond yields.

That said, the S&P 500 Futures print mild losses near 4,147 after posting a stellar run-up on Friday whereas the US 10-year Treasury bond yields dropped 1.5 basis points (bps) to 3.43%, pressured for the third consecutive week.

Looking ahead, inflation data from Germany and the US will join the likely European Union (EU) sanctions on China, due to its alleged role in the Russia-Ukraine war, which will direct immediate EUR/USD moves. Also important to watch will be banking updates and debt ceiling discussions amid a comparatively light Eurozone calendar.

Technical analysis

EUR/USD trades successfully above the 21-DMA support, near 1.0990 by the press time, which in turn joins bullish MACD signals and upbeat RSI (14) line to direct the Euro bulls towards an upward-sloping resistance line from mid-April, near 1.1115 at the latest.