Ella 
EUR/USD is trading slightly lower near 1.0780, having hit a 5.5-month-old rising support line during early European trade on Tuesday. EUR/USD reversed the previous day’s rebound from the aforementioned support line as European Central Bank (ECB) officials failed to deliver a hawkish signal and dollar yields held firm in the face of multiple catalysts in the euro zone and the United States.
More recently, the ECB’s chief economist, Phillip Lane, praised the softer inflation figures for August in an interview with Irish business publication The Currency on Aug. 31. However, the policymaker noted that such statistics need to continue to be provided to fend off the hawks.
On Monday, European Central Bank President Christine Lagarde stressed the need for central banks to firmly anchor inflation expectations. Deutsche Bundesbank President and ECB Governing Council member Joachim Nagel echoed the view, arguing for price stabilization but balking at further details.
However, it’s worth noting that Friday’s upbeat U.S. non-farm payrolls (NFP) and global ratings giant Moody’s upgrade to its U.S. growth forecast seemed to justify the Fed’s hawkish concerns and weighed heavily on euro prices. pressure. Still, Cleveland Fed President Loretta J. Mester defended the U.S. central bank’s hawkish moves and ruled out a rate cut in remarks Friday.
Elsewhere, a lack of confidence in China’s measures to safeguard the economy, as well as recent U.S.-China tensions over Taiwan and discomfort among U.S. companies in Beijing, have fueled sentiment and put a floor under the dollar. Nonetheless, China has recently announced a series of quantitative and qualitative measures to combat the impact of COVID-19. Likewise, the latest news suggests that Country Garden, China’s largest real-world player, has the ability to avoid default.
Against this backdrop, the U.S. Dollar Index (DXY) recorded modest gains around 104.25 after pausing its two-day rally the previous day. Still, S&P 500 Futures recorded slight losses, while the U.S. 10-year Treasury yield rose three basis points (bps) to 4.21% after the holiday.
On the data front, euro zone Sentix investor confidence and expectations fell in September, but the current situation index fell to its lowest level since November 2022, adding to the dovish bias in EUR/USD.
Looking ahead, the market’s disapproval of the ECB’s hawkishness and relatively subdued Eurozone data kept EUR/USD sellers hopeful as they awaited the bloc’s July producer price index (PPI) data for an update on U.S. factory prices in July. Get direct guidance before order data is released.
