• EUR/USD drops to 10-week lows near 1.0670 on Tuesday.
• The greenback appears well bid in new 2-month highs.
• Final EMU Consumer Confidence, US CB Consumer Confidence next on tap.

The European currency remains well on the defensive and dragged EUR/USD to new lows in the 1.0670 region on Tuesday.

EUR/USD weakens on USD-buying

EUR/USD loses ground for the sixth consecutive session on Tuesday and breaches the 1.0700 support for the first time since late March, always in response to the persevering march north in the dollar and a corrective move in the risk-associated space.

In the meantime, investors are expected to closely follow the US political scenario, where lawmakers will start discussing the recently announced bipartisan agreement on the US debt ceiling.

In addition, spot should remain under scrutiny in light of the upcoming US Nonfarm Payrolls (Friday) and the implications for the Fed’s interest rate decision on June 14.

Data-wise in the euro area, the final European Commission’s Consumer Confidence is due along with Economic Sentiment and Industrial Sentiment. In the US, the Consumer Confidence gauge measured by the Conference Board will be in the limelight, followed by the FHFA’s House Price Index.

What to look for around EUR

The sell-off in EUR/USD appears unabated after the pair broke below the key support at 1.0700 the figure on Tuesday.

In the meantime, the pair’s price action is expected to closely mirror the behaviour of the US Dollar and will likely be impacted by any differences in approach between the Fed and the ECB with regards to their plans for adjusting interest rates.

Moving forward, hawkish ECB speak continues to favour further rate hikes, although this view appears to be in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: EMU Final Consumer Confidence, Economic Sentiment, Industrial Sentiment (Tuesday) – Germany Unemployment Change, Unemployment Rate, Flash Inflation Rate, ECB Lagarde (Wednesday) – Germany Retail Sales/Final Manufacturing PMI, EMU Final Manufacturing PMI, Flash Inflation Rate, ECB Lagarde, ECB Accounts (Thursday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle in June and July (and September?). Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched