EUR/USD Trading Around1.1600 As The Dollar Rebounds With Yields
The greenback has rebounded from its recent slump, and it is now trying to reclaim some of its lost position against the leading currencies.
Higher Treasury Yields Push The USD Higher
The US Dollar has been one of the underperforming currencies so far this week. Since the NFP data on Friday last week, the greenback has been underperforming against its peers. The EUR/USD pair rallied past the 1.1600 earlier this week and has maintained the momentum ever since.
However, the EUR/USD pair is currently battling the 1.1600 level as the greenback rebounds from its recent slump. The pair’s performance is most likely to be determined by the US Treasury bond yields and their impact on the greenback’s valuation.
The benchmark 10-year US T-bond yield dropped lower yesterday and lost 1.6% of its value. However, the 10-year yield has stayed above 1.5% ever since, and this has given investors hope that the USD could reverse its recent losses.
While the US Treasury Yield offers hope for the USD, the European currency couldn’t increase its lead thanks to the dovish commentary from European Central Bank (ECB) officials. According to ECB policymaker Klass Knot, the bank is considering its options to ease the transition of its Pandemic Emergency Purchase Programme (PEPP).
The ECB President Christine Lagarde said the increase in prices is due to some temporary factors and not inflation. Investors will now be watching the September Retail Sales data and the University of Michigan’s preliminary October Consumer Sentiment Index report from the US to determine how the greenback will perform heading into the weekend.
EUR/USD Could Drop Below 1.1600
The EUR/USD pair could likely drop below the 1.1600 level over the coming hours if the greenback can continue its recent recovery. Wall Street indexes are performing well so far today, and that could provide further strength for the US Dollar.
At the time of writing, the EUR/USD pair is trading at 1.1601. However, it could likely drop lower if the greenback performs well and the ECB maintains its dovish stance.
This article was originally posted on FX Empire
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