- EUR/USD has turned sideways after retreating from 1.0225 as traction is returning to risk-sensitive assets.
- Less-hawkish commentary from Fed policymakers has started weighing on US Treasury yields.
- The ECB is expected to slow down its pace of hiking interest rates.
The EUR/USD pair is displaying back-and-forth moves around 1.0260 after resurfacing from the critical support of 1.0225 in the Tokyo session. The asset is expected to extend its recovery after overstepping the immediate hurdle of 1.0270 decisively as the risk-off profile is losing its traction.
The US dollar index (DXY) is establishing below its crucial support of 107.60 as investors are getting anxious ahead of the release of the US Durable Goods Orders data. S&P500 futures are displaying signs of volatility contraction amid a quiet market mood broadly. Meanwhile, the returns on US government bonds are facing pressure again.
The 10-year US yields have slipped below 3.82% after a recovery move as Federal Reserve (Fed) policymakers have supported the view of slowing down the pace of interest rate hikes. Cleveland Fed Bank President Loretta Mester supported the view that it makes sense to slow down the pace of the rate hike a bit in an interview with CNBC but doesn’t see a pause in the rate hike cycle yet. Also, San Francisco Fed President Mary Daly said on Monday that “it will be right for the Fed to slow its rate hike pace” when asked about interest rate guidance for December Federal Open Market Committee (FOMC).
On the Eurozone front, investors are shifting their focus towards chatters over interest rate hikes by the European Central Bank (ECB) in its December monetary policy meeting. ECB Chief Economist Philip Lane said that the central bank will consider reducing its pace of rate increases at its December 15 meeting, in an MNI interview on Monday. He further added that the big move, hiking interest rates by 75 basis points (bps), has already been done, and now the bank would look for the inflation outlook for further moves.