The EUR/USD struggled to profit from its tiny intraday recovery from a multi-month low :
The EUR/USD pair gave up much of its intraday gains and fell back below the mid-1.1200s as the North American session began.
On Tuesday, the pair gained some traction, recovering roughly 50 pips from the 1.1225 area, its lowest level since July 2020. The upswing was bolstered further by positive German/Eurozone PMI readings for November, however a confluence of factors limited the EUR/USD pair’s advance.
Investors appear to be concerned about the economic consequences of the increasing number of COVID-19 infections and the reintroduction of lockdown measures in Europe. This might provide the European Central Bank (ECB) another reason to be more dovish, which would be a drag on the common currency.
On the other side, the prospect of an early Fed policy tightening aided the US dollar’s ability to maintain firm near a 16-month high. Market bets were strengthened as US President Joe Biden selected Jerome Powell to be the Federal Reserve chairman for a second term.
Meanwhile, rising expectations for a Fed rate hike have pushed the yield on the benchmark 10-year US government bond back above the 1.65% level. This was considered as another reason that supported the greenback and, for the time being, put any major recovery for the EUR/USD pair at bay.
Market participants are now anticipating the release of flash US PMIs to provide some impetus during the early North American session. However, the spotlight will be on Wednesday’s release of the Preliminary (second estimate) US Q3 GDP, Durable Goods Orders, Core PCE Price Index, and FOMC meeting minutes.
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