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May 25 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Dips To Support On ECB Remarks Before Fed Rehash

By Randolph Donney  —  May 25 - 02:55 PM

The dollar rose on Wednesday after ECB officials walked back some of the more hawkish expectations for euro zone monetary policy, but it retreated from its highs after below-forecast durable goods data and three-week-old Fed minutes that couldn't address more recent economic worries.

ECB board member Fabio Panetta questioned the need to get interest rates back up to neutral setting nL2N2XH0GR while Dutch central bank chief Klaas Knot said he didn't expect discussion of balance sheet reduction this year nF9N2UZ02B.

The EUR/USD eventually found support at 1.0642, the daily kijun and May 5 post-FOMC swing high that prices surged above on Monday.
That and durable goods orders nL2N2XH11V -- the latest in a string of disappointing reports -- briefly weakened Treasury yields and the dollar.

The dollar index, dominated by the euro's majority weighting, rebounded to its daily kijun line at 102.45, aided by USD/JPY's bounce from Fibo support probed on Tuesday and Bank of Japan Governor Haruhiko Kuroda noting why there is less need for BOJ tightening compared to Europe and the U.S. nT9N2NW000.

EUR/USD fell 0.55%, but was off the 1.0642 low on EBS, finding nothing new in the FOMC minutes nS0N2XB00E to reinstate the higher Fed rate hike pricing from earlier this month, as the pace of tightening after July remains in debate.

USD/JPY was up 0.37%, having found retracement and weekly tenkan support on Tuesday and a slight bounce in Treasury-JGB yields and equities favoring the dollar and dimming demand for the haven yen.

Sterling gained 0.35% after being rangebound ahead of the FOMC minutes, with its recovery high from May lows near the 30-day moving average and kijun, Wednesday at 1.2581/623, as well as from May's 1.26375 high.

Another raft of Chinese economic support measures announced on Tuesday nL2N2XF0OI failed to keep USD/CNH from rebounding 0.9% Wednesday as the durability of reopenings from China's zero-COVID lockdowns is assessed.

The dollar even managed to make intraday gains against the New Zealand dollar after the kiwi rallied earlier on the RBNZ's 50bp rate hike and expectation for a 4% peak in 2023 nL2N2XH03U; a peak some in the market see as out of reach.

Aussie fell 0.27%, consolidating its recovery from May's 22-month lows.

A choppy session for equities left bitcoin and ether in their recent post-plunge consolidation ranges.

Thursday features U.S. GDP revisions, jobless claims and pending home sales.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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