- EUR/USD has attempted to come outside the woods on a bullish note amid an upbeat market mood.
- Fed Kashkari sees interest rate peak around 5.4% to tame soaring inflation.
- Falling energy prices in Eurozone have supported lower consensus for HICP data.
The EUR/USD pair is attempting to deliver a breakout of its consolidation range in the Asian session formed above the round-level support of 1.0600. The major currency pair is likely to remain in the bullish trajectory amid the risk-on market mood.
S&P500 futures are displaying a marginal correction in Asia, however, the overall risk profile is still solid considering decent gains recorded on Wednesday. The US Dollar Index (DXY) is hovering below 104.00 and is likely to remain on tenterhooks as expectations of further ease in inflation expectations in the United States would keep short-term pain in safe-haven assets.
As per the Federal Open Market Committee (FOMC) minutes, all of the Federal Reserve (Fed) policymakers favored deceleration in the pace of policy tightening. Fed policymakers still seek more inflation-softening evidence to surrender hawkish thoughts for monetary policy.
Meanwhile, Minneapolis Fed President Neel Kashkari said on Wednesday that the Fed must avoid cutting the policy rate prematurely and having inflation flare up again, as reported by Reuters. He further added that the interest rate should peak around 5.4% and then an unchanged policy to achieve the 2% inflation target.
This week, investors will keenly focus on the second catalyst scrutinized by the Fed for drafting the monetary policy. Friday’s Nonfarm Payrolls (NFP) is likely to trim to 200K vs. the former release of 263K. Apart from that, investors will focus on the Average Hourly Earnings (Dec) data, which is seen as marginally lower at 5%. Further escalation in wage bills might propel Consumer Price Index (CPI) as households will remain with more money for disposal.
On the Eurozone front, investors are awaiting the release of the Harmonized Index of Consumer Prices (HICP), which is scheduled for Friday. As per the consensus, the headline HICP is likely to drop to 9.7% vs. the prior release of 10.1%. Thanks to the falling energy prices and the government's one-off payment of household energy bills, which has resulted in lower consensus. Surely, this will mesmerize the European Central Bank (ECB) ahead.
