EUR/USD TURNS NEGATIVE BELOW 1.0700 ON USD RECOVERY

EUR/USD now adds to Wednesday’s decline below 1.0700.

Fed’s L.Mester stressed inflation risks remain on the upside.

US Producer Prices rose more than estimated in January.

Another data-led rebound in the greenback puts EUR/USD under fresh pressure and drag it to the sub-1.0700 region on Thursday.

EUR/USD weak on USD bounce

EUR/USD now extends the selling pressure seen in the previous session in response to another bullish attempt in the greenback, this time following results from the US docket and hawkish remarks from Fed’s L.Mester (2024 voter, hawk).

Indeed, the pair revisited the area below 1.0700 the figure after US Producer Price rose more than expected a monthly 0.7% in January and 6.0% from a year earlier. Still on the strong side, weekly Initial Claims increased by 194K in the week to February 11, showing once again the persistent good health of the labour market.

On the not-so-bright side, Building Permits expanded at a monthly 0.1% in January - or 1.339M units - Housing Starts shrank 4.5% MoM - or 1.309M units - and the Philly Fed Manufacturing Index disappointed everybody after declining to -24.3 for the current month.

Earlier in the session, ECB’s F.Panetta suggested inflation in the region could drop below the 3% at some point towards the end of the year, while he also warned against risks of over-tightening (seriously?).

From the Fed’s playground, Cleveland Fed and well-known hawk L.Mester (2024 voter) reiterated that inflation remains too high at the time when she noted that the current Fed’s tightening cycle should slow growth and increase unemployment. She also advocated for rates to climb above the 5% level and stay there for an extended period of time.