• EUR/USD has struggled while extending its recovery above 1.0980 amid an overall downbeat market mood.
• The USD Index has turned sideways after a corrective move to near 101.80 ahead of US GDP data.
• The ECB is expecting inflation to decline to 2% in late 2024.

The EUR/USD pair is facing barricades around 1.0980 after a short-lived pullback move from 1.0965 in the Asian session. The major currency pair was heavily dumped by the market participants amid a stellar recovery in the US Dollar Index (DXY). Investors are pumping money into the USD Index amid anxiety ahead of the monetary policy by the Federal Reserve (Fed), which is due next week.

S&P500 futures have added significant gains in the Asian session. The 500-US stocks basket witnessed an intense sell-off on Tuesday after vulnerable quarterly earnings from the First Republic Bank renewed fears of a banking fiasco. The United States commercial bank reported a steep decline in deposits from customers, which forced it to rely on external borrowings that come with heavy interest tags. Significant gains added in S&P500 futures in early Asia indicate a recovery in the risk appetite of the market participants.

The US Treasury yields have also rebounded as a recovery in the S&P500 futures has impacted demand for US government bonds. The 10-year US Treasury yields have scaled to near 3.42%.

The USD Index has turned sideways after a corrective move to near 101.80. This week, US Gross Domestic Product (GDP) data will remain in the spotlight. Annualized GDP (Q1) is expected to decelerate to 2.0% from the former release of 2.6%. This would indicate a slowdown in the US economy must be due to higher interest rates from the Fed.

On the Eurozone front, European Central Bank (ECB) Governing Council member and Bank of France head Francois Villeroy de Galhau said on Tuesday, “Inflation will probably come down towards 2% at the end of 2024.” He further added, “Food price inflation will start to ease in 2h 2023.”