Euro boosted on further rate hike

The EUR/USD pair has found an intermediate cushion after a steep correction to near the psychological support of 1.1000. The major currency pair is defending its downside as investors as the US Dollar Index (DXY) is facing barricades in extending its recovery significantly above 101.80.

The US Dollar Index (DXY) is failing to attract more bids as investors are divided due to expectations of neutral interest rate guidance from the Federal Reserve (Fed). A consecutive 25 basis point (bp) interest rate hike from the Fed cannot be ruled out, however, further roadmap seems less bumpy amid easing United States inflationary pressures.

Meanwhile, S&P500 futures have added more gains in early London, portraying further improvement in the risk appetite. The 10-year US Treasury yields seem sideways above 3.45%.

Investors should brace a volatile action from the USD Index amid the release of the US ISM Manufacturing PMI (April) data. As per the consensus, the economic data is seen higher at 46.6 from the former release of 46.3. A figure below 50.0 is considered a contraction in manufacturing activities and consistency with consensus will make it the sixth consecutive contracting month.

Apart from that, New Orders data indicates forward demand is seen expanding to 45.5 vs. the prior release of 44.3.

On the Eurozone front, preliminary Gross Domestic Product (GDP) expanded by 0.1% in the first quarter while the street was anticipating an expansion of 0.2%. The shared continent has managed to doge contraction anyhow but the risk of recession has cemented. Annual GDP expanded by 1.3% lower than the estimates of 1.4% and the former release of 1.8%.

German inflation decelerated in April but is insufficient to stop the European Central Bank (ECB) from hiking interest rates further. ECB President Christine Lagarde is expected to continue announcing mega rate hikes to arrest sticky inflation.