EUR/USD stays depressed below 1.1000 amid firmer US Dollar

EUR/USD is on the back foot below 1.1000 in the European session, uninspired by the hawkish ECB commentary. The mixed market mood is helping the US Dollar sustain its recovery gains, undermining the currency pair. Speeches from Fed policymakers eyed.

EUR/USD has lost its traction in the European morning and broke below 1.1000. As long as this level stays intact as resistance, the pair could extend its downward correction in the short term.

On Monday, the US Dollar Index started to edge higher in the American session, supported by the recovering US Treasury bond yields. The risk-averse market environment also helped the US Dollar hold its ground against its major rivals. Early Tuesday, Euro Stoxx 50 trades in the negative territory and US stock futures are down between 0.2% and 0.3%, suggesting that investors remain cautious.

The US Federal Reserve’s quarterly survey revealed on Monday that banks have reported tighter standards and weaker demand for commercial and industrial loans to large and middle-market firms over the first quarter. The Fed further noted that tighter standards and weaker demand for all commercial real estate loan categories were also mentioned by survey respondents.

Meanwhile, European Central Bank (ECB) policymaker Martins Kazaks said on Tuesday that a rate hike in July might not be the last rate increase this year. On Monday, ECB Chief Economist Philip Lane noted that there was still a lot of momentum in food and core inflation in the Euro area. Nevertheless, these hawkish comments don’t seem to be having a positive impact on the Euro’s performance against its rivals.

Later in the day, markets will continue to keep a close eye on comments from central bank officials. Federal Reserve Governor Philip Jefferson and NY Fed President John Williams will be speaking on Tuesday. Ahead of Wednesday’s April inflation data from the US, investors could refrain from taking large positions but the USD is likely to benefit if Fed officials push back against the market expectation for a pause in the tightening cycle in June.

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