EUR/USD clings to recovery near 1.0840 as Eurozone manages to avoid recession

• EUR/USD holds onto gains as the ECB avoids a technical recession.
• The USD Index stuck in a tight range ahead of Fed’s monetary policy.
• Investors anticipate the Fed keeping interest rates steady.

The EUR/USD pair rises to near 1.0840 as the Eurozone economy has managed to avoid a technical recession. The major currency pair witnesses buying interest as slightly better preliminary Q4 Gross Domestic Product (GDP) data would allow the European Central Bank (ECB) to maintain interest rates higher for sometime more than what investors are anticipating.

Eurostat reported that the economy remained stagnant in the October-December quarter while investors anticipated a de-growth by 0.1%. In annualized terms, the economy grew slightly by 0.1% after remaining stagnant.

The S&P500 is expected to open on a bearish note, considering overnight futures that are negative. The US Dollar Index (DXY) has recovered to near 103.50 but is broadly sideways as investors await the Federal Reserve’s (Fed) monetary policy, which will be announced on Wednesday.

The Fed is seen keeping interest rates steady in the range of 5.25-5.50% for the fourth time in a row while outlook on interest rates will keep investors on their toes. The market mood could turn volatile if the Fed pushes back expectations of a rate-cut in the March or May monetary policy meetings. Fed policymakers have been reiterating the need of keeping interest rates higher for longer than what market participants are anticipating. Premature rate cuts could lead to a sharp uptick in the aggregate demand, which could prompt price pressures.

Before Fed’s interest rate policy, investors will focus on the US JOLTS Job Openings data for December, which will be published at 15:00 GMT. Investors anticipate a slight decline by 4K to 8.75 million from November’s reading.