Sage Investment Club

  • EUR/USD is in a rangebound territory as solid yields are weighing on risk-perceived currencies.
  • The release of the US PPI will provide more cues about inflation projections.
  • According to Bloomberg’s poll, the ECB is expected to find an interest rate peak at 3.25%.

The EUR/USD pair has continued to trade rangebound near 1.0830 in the Asian session. The major currency pair is displaying a lackluster performance amid ambiguity in the risk profile as the United States markets will open on Tuesday after a stretched weekend. A volatility contraction in the asset is likely to get exploded ahead.

S&P500 futures have shown a marginal loss as investors have turned anxious amid after holiday mood. The US Dollar Index (DXY) has sensed barricades after testing Monday’s high at 102.20. The USD Index is putting efforts in sustaining above the critical support of 102.00. Meanwhile, the 10-year US Treasury yields have escalated further to near 3.54%, weighing on the risk-appetite theme.

Investors should brace for a power-pack action after the release of the United States Producer Price Index (PPI) data. A change in the prices of goods and services at factory gates is going to provide more cues about inflation projections. The street sees a decline in headline factory gate prices of goods and services (Dec) to 6.8% from the former release of 7.4%. Also, the core PPI might trim to 5.9% from the former release of 6.2% in a similar period.

The Euro is expected to hog the limelight as the European Central Bank (ECB) is aiming to achieve the interest rate peak by the Summer.

A poll from Bloomberg indicates that ECB President Christine Lagarde is expected to push interest rates to 3.25%. The central bank will announce 50 basis points (bps) interest rate hike in February and March and a 25 bps rate hike in May that will support the ECB in achieving a terminal rate from the current rate of 2%.


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