- Market sentiment turns sour in American session on Tuesday.
- US Dollar Index retraces majority of daily drop.
- Consumer confidence in US deteriorates sharply in April.
Boosted by the upbeat market mood, the EUR/USD pair rose to a fresh weekly high of 1.0890 during the European trading hours. However, the pair struggled to preserve its momentum as the disappointing data from the US ramped up the demand for the greenback during the American session. As of writing, the pair was little changed on a daily basis at 1.0833.
Earlier in the day, heightened hopes of major European economies normalizing by starting to ease coronavirus-related restrictions helped European equity indexes gains traction and supported the risk-sensitive euro. The next catalyst for the shared currency will be the European Commission’s sentiment report that will include Consumer Confidence, Business Climate and Economic Sentiment indexes.
Focus shifts to FOMC
On the other hand, the US Dollar Index (DXY) reversed its direction in the second half of the day after the Conference Board’s monthly report revealed a sharp deterioration in consumer sentiment. The Consumer Confidence Index in April plunged to 86.9 from 118.8. Although it remains in the negative territory, the DXY pulled away from the 13-day low it set at 99.45 and was last seen posting small daily losses at 99.88.
On Wednesday, the US Bureau of Economic Analysis will publish the first-quarter GDP data. More importantly, the FOMC will announce its interest rate decision and release its monetary policy statement.
Previewing this event, “we expect Fed Chair Powell to stress the Fed’s ability and willingness to support activity and asset markets without providing specifics,” said Standard Chartered analysts. “On balance, he is likely to provide an asset-market-friendly message, because there is no benefit in doing otherwise.”
Technical levels to watch for