EUR/USD regains the smile and retargets 1.0800

• EUR/USD bounces off lows near 1.00760 on risk-on mood.
• ECB’s Economic Bulletin reiterated that price pressures remain strong.
• Investors’ attention will be on Powell and further Fedspeak.

After bottoming out in the area of new 2-month lows near 1.0760, EUR/USD manages to pick up pace and approach the key barrier at 1.0800 the figure at the end of the week.

EUR/USD looks to retake 1.0800

The improved sentiment in the risk-linked galaxy underpins the pair’s recovery to the vicinity of the 1.0800 hurdle on Friday amidst profit taking in the greenback and a broad-based optimism among market participants.

Indeed, rising hopes that US policy makers could clinch a deal over the debt ceiling issue in the next few days continue to prop up the appetite for the riskier assets and lend much-needed oxygen to the pair.

Nothing to write home about from President L. Lagarde’s earlier comments, after shed acknowledged the bank is “heading towards more delicate decisions going forward”. Still around the ECB, the bank’s Economic Bulleting noted that price pressures remain strong while wage pressures have strengthened.

In the domestic calendar, Producer Prices in Germany rose 0.3% MoM and 4.1% in the year to April, both prints coming in above estimates. In the US, NY Fed J. Williams (permanent voter, centrist) and FOMC Governor M. Bowman (permanent voter, centrist) are due to speak along with a panel discussion with the participation of Chair J. Powell and ex-Fed B. Bernanke.

What to look for around EUR

EUR/USD manages to reclaim some ground lost in the last three sessions and now attempts to retake the 1.0800 region on Friday.

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 C. Lagarde (Friday).

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 gaining 0.27% at 1.0798 and the breakout of 1.0866 (55-day SMA) would target 1.1095 (2023 high April 26) en route to 1.1100 (round level). On the flip side, immediate contention comes at 1.0759 (monthly low May 19) seconded by 1.0712 (low March 24) and finally 1.0516 (low March 15).