EUR/USD Talking Points:
EUR/USD Ahead of Non-Farm Payrolls and Euro Sentiment Survey Data
The Euro received a much needed bounce last Friday as global financial markets wrestled with news of a new coronavirus variant which we have now come to know as Omicron. The higher move in the pair was more a case of dollar weakness than Euro strength as rates markets priced in a more conservative timeline for US rate hikes next year. Fast forward a few days and early reports suggest that Omicron patients have been experiencing mild symptoms although the World Health Organization cautioned that more time is needed to know this for sure.
While the Euro may benefit in the short term from inconsistent dollar movements, it is expected to remain under pressure heading into 2022 as a growing number of European Central Bank governors consider life after its Pandemic Emergency Purchase Program (PEPP) – the Eurozone’s stimulus program in response to Covid-19. Policymakers will decide whether to end PEPP in March and to what extent they will purchase debt thereafter. Complicating the matter is the not so small issue of inflation which is heating up the Eurozone via both the headline and core inflation, proving that non-energy related sectors are experiencing persistent inflationary pressure. Core inflation printed at 2.6% last week which exceeds the central bank’s target of 2%.
Major risk events ahead include US non-farm payroll data on Friday, ECB President Christine Lagarde’s speech tomorrow and the ZEW economic sentiment index next week:
For information on major event risk, take a look
