EUR/USD weakens further and approaches 1.0800 ahead of Lagarde

• EUR/USD adds to the weekly decline near 1.0800.
• ECB’s De Guindos leaves the door open to extra rate hikes.
• President C. Lagarde speaks later in the session.

Further selling pressure continues to hurt the European currency and forces EUR/USD to recede further and trade at shouting distance from the key barrier at 1.0800 the figure on Thursday.

EUR/USD weaker on USD-buying, risk-off trade

EUR/USD gives away further ground and retreats for the third straight session on Thursday, putting at the same time the 1.0800 key support to the test amidst the intense march north in the greenback.

As usual in past sessions, the persevering risk-off mood remains propped up by lingering jitters around the US debt ceiling issue, which in turn lends support to the renewed upside bias in the buck.

Also weighing on the single currency appears the now milder tone from ECB’s rate setters, after Vice-President L. De Guindos argued earlier in the session that the bank has already done most of the tightening despite hinting at the probability of extra hikes in the next periods. His colleague A. Müller (usual hawk), instead, ruled out the possibility of rate cuts early next year.

In the euro docket, President C. Lagarde will speak later on Thursday in what will be the sole event this side of the Atlantic. In the NA session, Initial Jobless Claims are due in the first turn followed by the Philly Fed Manufacturing index, Existing Home Sales and the CB Leading Index. Additionally, FOMC’s P. Jefferson, L. Logan and M. Barr are all due to speak.

What to look for around EUR

EUR/USD extends the weekly decline and gradually approaches the key 1.0800 neighbourhood as the trading week draws to a close.

The movement of the euro's value is expected to closely mirror the behaviour of the US Dollar and will likely be impacted by any differences in approach between the Fed and the ECB with regards to their plans for adjusting interest rates.

Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: ECB Lagarde (Thursday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle in June and July (September?). Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is retreating 0.19% at 1.0817 and faces immediate contention at 1.0809 (monthly low May 18) seconded by 1.0805 (100-day SMA) and finally 1.0788 (monthly low April 3). On the flip side, the breakout of 1.1095 (2023 high April 26) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022).