EUR/USD experienced a rally exceeding 0.80% on Monday, as the Greenback remained stable in the wake of recent developments indicating that Chinese authorities advised financial institutions to reduce their holdings in US Treasuries, citing significant volatility in the fixed income markets. Currently, the pair is trading at 1.1916, having rebounded from daily lows of 1.1808.
EUR/USD rises more than 0.80% as Treasury trimming related to China contributes to widespread Dollar weakness. With a risk-on sentiment prevailing and the results of the Japan election influencing market dynamics, the DXY has reached six-day lows, particularly in light of limited US economic data. Attention shifts to US Retail Sales, wage data, and remarks from Christine Lagarde of the ECB.
> The Euro experiences a notable increase as reports indicate a decrease in Chinese Treasury exposure, coupled with a heightened risk appetite that weighs on the Greenback: The improvement in risk sentiment, alongside Japanese Prime Minister Takaichi’s decisive victory, has driven the American currency to a new six-day low, as illustrated by the US Dollar Index. Initially, the USD/JPY experienced an upward movement, but it pulled back following a statement from Japanese top diplomat Atsushi Mimura, who indicated that they are “closely watching currency movements with a high sense of urgency.” The limited economic calendar in the US featured the publication of the NY Fed Survey of Consumers Expectations alongside remarks from Federal Reserve officials. On Tuesday, market participants will focus on the upcoming release of Retail Sales data and the Employment Cost Index, which assesses wage trends. In Europe, the agenda included addresses from officials of the European Central Bank. ECB President Lagarde announced that Francois Villeroy will resign from his position at the central bank effective June 1.
Latest FX Rate Trends: The Euro appreciates while the US Dollar remains stable
- The US Dollar Index, which monitors the performance of the greenback relative to a group of six key currencies, has decreased by 0.86%, currently standing at 96.82.
- The New York Fed’s Survey of Consumer Expectations indicated a decline in one-year inflation expectations, dropping to 3.1% in January from the previous 3.4%. Inflation expectations for the three- and five-year periods remained steady at 3%.
- Upon further examination of the poll, it is evident that credit conditions have softened since December, whereas views regarding the labor market have shown improvement.
- ECB Gediminas Šimkus indicated that there is an equal probability of a rate hike or a cut in the near future, given that rates are currently at a neutral level and growth is approaching its potential. ECB’s Martin Kocher stated that inflation expectations are firmly anchored, indicating that a shift in the macroeconomic environment would be necessary to alter the current policy stance.
- During the plenary debate on the state of the Eurozone economy and ECB activities in Strasbourg, France, on Monday, European Central Bank President Christine Lagarde stated that they anticipate inflation to stabilize sustainably at the ECB’s 2% medium-term target.