Euro struggles for direction north of 1.0900 as investors digest the ECB

• Euro advances to new multi-week tops near 1.0960.
• Stocks markets in Europe open with marginal changes.
• The appetite for the risk complex appears slightly favoured on Friday.
• ECB’s J. Nagel and B. Vasle advocated for an extra hike in the summer.
• EMU Final Inflation Rate is due later in the domestic docket.
• US Flash Consumer Sentiment and Fedspeak comes later in the session.

The European currency (EUR) seems to struggle to continue its weekly sharp rally and motivates EUR/USD to recede from earlier multi-week peaks near 1.0960 at the end of the week, and area last visited in mid-May.

In the meantime, risk appetite trends appears somewhat divided as investors continue to adjust to Thursday’s hawkish message from the ECB, after the central bank walked the talk and raised rates by 25 bps and signalled that more is coming at the July meeting.

On the latter, ECB Board members Joachim Nagel and Bostjan Vasle advocated earlier in the European morning for an extra 25 bps rate hike in the summer, a view that falls in line with President Christine Lagarde’s comments on Thursday.

Back at the ECB event, the bank's rate increases were underscored during the press conference, where President Lagarde dedicated a significant amount of time emphasizing factors that contribute to inflation growth, such as robust wage increases, improved profit margins, and high expectations of inflation. Although potential risks to economic growth and stricter financial conditions were acknowledged, the primary message conveyed by the ECB today was its commitment to maintain the upward trajectory of interest rates. As Lagarde mentioned, the ECB has no intention of considering a pause at the moment.

The domestic calendar will include the final inflation figures in the euro area for the month of May, whereas the preliminary Michigan Consumer Sentiment gauge will be the salient release across the pond along with speeches by St. Louis Fed James Bullard (2025 voter, hawk) and FOMC’s Christopher Waller (permanent voter, hawk).

Daily digest market movers: Euro seems to have met initial hurdle near 1.0960

• The US Dollar attempts a tepid bounce and encourages the USD Index (DXY) to put some distance from earlier multi-week lows near 102.00.
• US and German yields pick up pace, while their inversion keep signalling the likelihood of a recession in the next months.
• It seems that a continuous decrease in the Greenback is not certain after the FOMC event on Wednesday, as the Committee plans to resume increasing interest rates, potentially starting as early as July and Jerome Powell clarified that the decision not to increase rates at the current meeting was not a "skip".
• EMU Final inflation figures due later in the session are expected to confirm the gradual disinflation.
• Consensus expects a slight improvement in the US Consumer Sentiment in June, while the resumption of the hawkish narrative should not be ruled out when C. Waller speaks later in the session.

Technical Analysis: Euro faces a key hurdle at 1.1000

Euro (EUR) printed a new monthly high at 1.0962 on June 16. Further gains need to rapidly clear this level to allow for a potential move to the psychological 1.1000 hurdle. North from here, the pair could challenge the 2023 high at 1.1095 (April 26), which is closely followed by the round level of 1.1100 and comes ahead of the weekly top of 1.1184 (March 31, 2022). In addition, the latter appears propped up by the proximity of the 200-week SMA, today at 1.1182.

In case bears regain the initiative, there are no contention levels of significance until the May low of 1.0635 (May 31). The breach of this level could sponsor a deeper decline to the March low of 1.0516 (March 15) seconded by the 2023 low at 1.0481 (January 6).