• EUR/USD remains steady after a volatile day, positive on the week so far.
• US inflation data came in better than forecast but came in below previous readings in January.
• Hawkish Fed talks propelled US Treasury bond yield and US Dollar.
• An absence of hawkish tone in Lagarde’s speech, upbeat US data needed for further downside.

EUR/USD seesaws around 1.0730 after a volatile Wednesday that initially refreshed the weekly top before posting a 100-pip fall and then bouncing off 1.0706. In doing so, the major currency pair struggles for clear directions but defends the policymakers’ hawkish bias for the Federal Reserve (Fed) rates, despite unimpressive US and European data, mainly the US inflation.

That said, the US Consumer Price Index (CPI) rose past market expectations to 6.4% YoY but posted the slowest increase since 2021 while easing below 6.5% prior. More importantly, CPI ex Food & Energy, better known as the Core CPI, grew 5.6% YoY compared to 5.5% market forecasts and the 5.7% previous readings. Following the data, the US Dollar renewed its intraday low before the Federal Reserve (Fed) talks propelled the US Treasury bond yields and the US Dollar.

While considering the data, Dallas Federal Reserve President Lorie Logan stated that they must remain prepared to continue rate increases for a longer period than previously anticipated. On the same line was New York Fed President John Williams who noted that the work to control too high inflation is not yet done. Additionally, Philadelphia Fed President Patrick Harker signaled that they are not done (with lifting rates), but they are likely close.

On the other hand, the preliminary readings of the Eurozone fourth quarter (Q4) Gross Domestic Product (GDP) matched 0.1% QoQ and 1.9% YoY forecasts while reprinting the previous figures.

Following the data, European Central Bank (ECB) Governing Council member Gabriel Makhlouf said, “ECB could raise rates above 3.5% and hold them there for the remainder of the year,” per the Wall Street Journal (WSJ). Earlier on Tuesday, ECB policymaker Mario Centeno said that the full impact of rate hikes may not reach the European economy.

Amid these plays, US 10-year Treasury bond yields seesaw around 3.75%, up three basis points (bps) after refreshing a six-week high, which in turn allowed the US Dollar to bounce off one-week to end the day on a positive side. Further, Wall Street closed mixed even after the mostly upbeat performance of the Asian and European markets.

Moving on, ECB President Christine Lagarde’s speech and monthly prints of the US Retail Sales for January, expected 1.8% versus -1.1% prior, will be closely watched for clear directions. Given the recent risk-off mood and firmer yields, the EUR/USD sellers are likely to return to the table in case the scheduled data/events allow.

Technical analysis

Although failure to provide a daily close beyond the 21-day Exponential Moving Average (EMA), around 1.0770, appears elusive for EUR/USD bears unless the quote breaks the 50-day EMA support, near 1.0680 by the press time.