EUR/USD steadies around 1.0600, after paring the week-start gains, as buyers run out of steam during Tuesday’s Asian session.
The major currency pair began the week on a positive note amid hawkish bias surrounding the European Central Bank (ECB), especially after President Christine Lagarde highlighted the need for more rate hikes. Additionally favoring the EUR/USD bulls were firmer German sentiment numbers from the IFO institute for December.
That said, the majority of the ECB policymakers followed President Lagarde and backed further rate increases, which in turn propelled EUR/USD prices on Monday. Notable among them were Vice-President Luis de Guindos and the ECB board members, Gediminas Simkus and Peter Kazimir.
It’s worth noting that the German IFO Business Climate Index climbed to 88.6 in December versus the previous reading of 86.3 and the forecast of 87.2. Details suggest that the IFO Current Economic Assessment for the nation improved to 94.4 points in the reported month compared to November's 93.1 and 93.5 expected. Further, the IFO Expectations Index – indicating firms’ projections for the next six months, rose to 83.2 in December from the previous month’s 80.0 and against the estimates of 82.0.
Elsewhere, the US Dollar Index (DXY) began the week on a back foot as downbeat US PMIs for December raised doubts about the US Federal Reserve’s (Fed) hawkish bias. However, fears surrounding the global economic slowdown, mainly due to the higher rates and inflation fears, underpinned the US Treasury bond yields and weighed on the equities, which in turn helped DXY of late.
Moving on, EUR/USD buyers are likely to remain hopeful as the ECB hawks have an upper hand and the recent data from the bloc has been impressive. Even so, today’s German Producers Price Index (PPI) and the US housing numbers could offer fresh impulse.
EUR/USD bears remain hopeful as the corrective bounce off the 10-DMA, around 1.0585 by the press time, failed to cross the previous support line from November 30, close to 1.0655 at the latest.
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