• EUR/USD is aiming to deliver a break of the consolidation above 1.0830 as hawkish ECB bets soar.
• The ECB is expected to hike interest rates by 50 bps in February and March, and by 25 bps in May.
• A recovery in the S&P500 futures indicates that the risk-off impulse is fading away.

The EUR/USD pair is regaining strength after a sell-off move on Monday. The major currency pair is oscillating below the immediate resistance of 1.0830 in the early Asian session. Risk-perceived currencies witnessed a healthy correction on Monday amid a recovery in the US Dollar Index (DXY).

Investors’ risk appetite is improving again as the S&P500 futures have recovered half of Monday’s losses in early Tokyo. There is no denying the fact that the 500-stock basket futures of the United States will display sheer volatility today as US markets are opening after a stretched weekend.

The USD Index is displaying signs of volatility contraction around 102.00 after a solid recovery as investors are expected to make significant positions after the release of the US Producer Price Index (PPI) data, which will release on Wednesday. As per the consensus, the economic data is expected to decline further. The headline PPI (Dec) is seen lower at 6.8% while the core PPI is seen declining to 5.9%. Producers might look to trim their losses inspired by lower prices through easing wage growth or by lay-offs, which would trim inflation projections further.

Apart from the US PPI data, monthly Retail Sales data will be keenly watched. The economic data is expected to expand by 0.1% vs. the contraction of 0.6% released earlier. It could provide strength to the US Dollar ahead.

On the Eurozone front, considering the stubborn nature of inflation and rising wage growth due to the tight labor market, European Central Bank (ECB) Governing Council member Olli Rehn said on Monday, “I see significant rate hikes at the next meetings,”

A poll from Bloomberg predicts that the ECB will reach to its terminal rate by May. ECB’s interest rate will peak at 3.25% from its current rate of 2%. Further outcomes from the poll claim that ECB President Christine Lagarde will hike the interest rates by 50 basis points (bps) in February and March meetings. And, a rate hike of 25 bps will be announced in May. Also, the central bank may not look for lowering interest rates in CY2023.