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Jul 13 - 11:55 AM

EUR/USD - COMMENT-Hot US Inflation Highlights Fed, ECB Risks To EUR/USD

By Christopher Romano  —  Jul 13 - 09:40 AM

EUR/USD fell back below the 10-day moving average Tuesday following hotter-than-expected U.S. CPI data and could remain under bearish pressure on inflation concerns as ECB and Fed expectations diverge.

June headline CPI showed the largest rise in 13-years nL1N2OO1VQ while the rise in year-on-year core CPI was the largest since 1991.

The data drove the U.S. rate complex higher.
Eurodollar prices EDU2EDZ2 fell sharply as investors pulled forward expectations for the Fed's first rate hike into September 2022.

U.S.
Treasury yields spiked higher.
The 10-year yield US10YT=RR rallied to 1.39% before pulling back while 2-year yields US2YT=RR hit 0.267%.

The rise in rates helped rally the dollar against the major and emerging market currencies.
EUR/USD fell toward the July 7 daily and made a three-session low of 1.17915 on EBS.

EUR/USD's slide could extend as investors lean towards a less accommodative Fed while the ECB, as indicated by President Christine Lagarde on Monday nL1N2ON0KB, could possibly extend its accommodative policies.

A break of the July 7 low could trigger stop-loss selling, which would add to bearish pressure.
EUR/USD bears will then target 1.1700/05 support and possibly the November 2020 low at 1.1602.

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Source:
Refinitiv IFR Research/Market Commentary

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