EUR/USD pressured amidst strong US data, rising US bond yields

• EUR/USD stays in negative territory, down 0.06%, as solid US economic data triggers a jump in US Treasury bond yields and strengthens the US Dollar.
• Eurozone data largely aligned with estimates, while ZEW Economic Sentiment Index dropped sharply, reflecting increasing recession fears in the bloc.
• Upcoming speeches from regional Fed Presidents could provide further insight into US monetary policy, with some officials stating it’s too early to discuss rate cuts.

EUR/USD trims some of its earlier losses though it remains in negative territory, sponsored by solid economic data from the United States (US), triggering a jump in US Treasury bond yields. Therefore, the  US Dollar (USD) rose, helped by US bond yields, while Eurozone’s (EU) data was aligned with estimates. The EUR/USD is trading at 1.0868, down 0.06%.

US Dollar strengthens as Eurozone data aligns with estimates, ZEW sentiment index plunges

US equities are slightly mixed, except for the Nasdaq 100. US Retail Sales for April improved, with some figures missing estimates, but overall, the month-over-month (MoM) numbers beat March’s data, except for Retail Sales on an annual basis. Later, the US Federal Reserve (Fed) reported that Industrial Production for April rose by 0.5% MoM, above estimates, while year-over-year (YoY) stood at 0.2% above March’s 0.1%.

Although the EUR/USD’s initial reaction headed towards 1.0880s, overall US Dollar strength dragged the exchange rates toward the day’s lows at 1.0855. The US Dollar Index (DXY), a gauge of the buck’s value against a basket of six currencies, trimmed some of Monday’s losses, edging up 0.17% at 102.597.

The EU’s agenda revealed the Balance of Trader printed a surplus of 25.6 billion of Euro’s, above the prior’s month 4.6 Billion. Furthermore, the Gross Domestic Product (GDP) for Q1 was aligned with estimates at 1.3%, while the Employment Change QoQ rose 0.6% in Q1. The ZEW Economic Sentiment Index plunged to -9.4 as recession fears mount, despite the ongoing tightening cycle by the European Central Bank (ECB).

Aside from this, US debt ceiling discussions finished in the White House, and initial reports prompted that US Congress leaders agreed that a deal is possible by the end of the week while emphasizing that a default “is a horrible option.”

Late Fed speakers like Aaron Golsbee and Lorie Logan, Presidents of the Chicago and Dallas Fed Regional Banks, commented that it’s early to discuss interest rate cuts. Logan added that when conditions are uncertain, the Fed may need to move more slowly and added that we need to move slowly.

EUR/USD Technical Levels