EUR/USD eases from 1.0930 hurdle as Fed hawks retreat on inflation concerns

• EUR/USD pares the previous day’s rebound from one-week low, retreats from intraday high of late.
• Fed policymakers anticipate faster easing in inflation and trim hawkish bets.
• US Treasury bond yields fade upside momentum as recession woes ease, Euro growth chatters gain acceptance.
• Hawkish ECB talks, upbeat Eurozone data allow Euro buyers to remain firmer ahead of US CPI, Fed Minutes.

EUR/USD drops to 1.0915 as it consolidates the previous day’s rebound from a one-week low heading into Wednesday’s European session. In doing so, the Euro pair justifies the market’s cautious mood ahead of the key US Consumer Price Index (CPI) for March and the Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting. Also challenging the pair buyers could be the recent mixed comments from the Federal Reserve (Fed) and European Central Bank (ECB) policymakers.

That said, "Eurozone inflation is at risk of getting entrenched above 2% so the European Central Bank will keep fighting excessive price growth, even as its policy response is shifting gears," said French central bank chief Francois Villeroy de Galhau late Tuesday per Reuters.

On the other hand, Minneapolis Fed President Neel Kashkari teases US Dollar bulls as he said, “2% inflation target should not be changed.” It’s worth noting that Philadelphia Fed President Patrick Harker said that the Federal Reserve will continue to look closely at available data to determine what, if any, additional actions they may need to take. Before him, New York Fed President John Williams said that if inflation comes down, we will have to lower rates. Furthermore, Chicago Fed President Austan Goolsbee, said on Tuesday that they need to be cautious about raising interest rates after recent development in the banking sector.

Elsewhere, the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data, remain firmer and challenge the EUR/USD bulls of late.

Even so, the optimism surrounding the Eurozone economy and upbeat EU data, backed by the comments from the International Monetary Fund (IMF) seem to propel the EUR/USD price ahead of the top-tier factors.

Against this backdrop, US Dollar Index (DXY) licks its wounds near 102.15 after snapping a four-day uptrend the previous day. However, S&P 500 Futures remain directionless around 4,138 after a mixed Wall Street close. Further, the US Treasury bond yields grind higher and prod the US Dollar sellers. That said, the US 10-year and two-year Treasury bond yields grind higher around 3.43% and 4.03 during a four-day and five-day uptrend respectively.

Looking forward, firmer prints of the US CPI and hawkish Fed Minutes are both necessary to portray the EUR/USD pullback. Until then, the pair buyers keep 1.1000-05 resistance on their wishlist.

Also read: US CPI Preview: US Dollar on the back foot and poised to fall further

Technical analysis

EUR/USD portrays a three-week-old rising wedge bearish chart pattern, currently between 1.0870 and 1.1005. Adding strength to the upside filter is the February 01 peak. Given the impending bear cross on the MACD and the quote’s multiple failures to remain firmer past 1.0930, the Euro bears seem to flex muscles of late.