EUR/USD declines towards 1.0500, US inflation and ECB Lagarde in focus

• EUR/USD is inching towards 1.0500 as the DXY is getting stronger ahead of US inflation.
• Euro bulls are awaiting the speech from ECB’s Christine Lagarde.
• ECB Lagarde is not likely to dictate a ‘hawkish’ stance on further guidance.

The EUR/USD has tumbled below 1.0530 and is likely to test the psychological support at 1.0500.  The asset is scaling continuously lower right after the open bid on Monday. A bearish open drive has been observed yet and the asst is looking to test its previous week’s low at 1.0483.

Euro bulls are likely to remain volatile this week ahead of the speech from European Central Bank (ECB)’s Christine Lagarde, which is due on Wednesday. The speech from ECB’s Lagarde will provide insights on the likely monetary policy action by the ECB in June. It is worth noting that the ECB left its interest rates unchanged in its last interest rate decision announcement. The ECB dictated that policy rates will remain unchanged till the end of its bond-buying program, which is expected in the third quarter. Therefore, investors should not brace for a rate hike by the ECB before the end of this year.  Also, the fears of stagflation in the eurozone after the Ukraine crisis have eroded the chances of hawkish tone adaptation by the ECB.

Meanwhile, the US dollar index (DXY) is converting every corrective pullback into an optimal buying opportunity for the market participants. The DXY is strong enough on rising odds of a rate hike by the Federal Reserve (Fed) in June. At the press time, the DXY has climbed above 130.90 and is inching closer to recapturing the previous week’s high at 104.06.

Apart from ECB Lagarde’s speech, investors are focusing on the release of Wednesday’s US inflation. A preliminary estimate for yearly US inflation is 8.1% against the old print of 8.5%.