EUR/USD inter-markets: all eyes on Yellen

EUR/USD has surrendered part of the significant jump post-Payrolls on Friday, coming down to as low as the 1.1330 area after posting peaks in the vicinity of 1.1380.

A deeper retracement of the ongoing correction or a re-test of previous peaks highly rely on the speech by Chairwoman Janet Yellen due later in the NA session. Yellen will speak to the World Affairs Council of Philadelphia, on Economic Outlook and Monetary Policy. The relevance of today’ speech has greatly augmented after the disappointing figures from May Non-farm Payrolls, where the economy has created only 38K jobs vs. 164K initially forecasted.

Of course the catalyst of the abrupt upside has come in on the USD side: Fed Fund Rate contracts have dipped to levels last seen in mid-May, showing that a probability of a rate hike at the June meeting currently lingers just below 4% when tracked by the CME Group’s FedWatch tool.

Furthermore, a steady performance of the VIX gauge plus a USD-supportive spread between Treasuries and Bunds have sustained some recovery around the greenback while underpinning the down move in spot.

Consensus amongst traders expects Chief Yellen to keep alive a rate hike at some point in the summer, although markets seem to perceive that a little bit more is needed in order to revert the current sentiment.