EUR/USD Stabilizes Ahead of PCE Data Amid US Bond Buyback Hints
The EUR/USD pair stabilized above $1.1650 on Wednesday during Asian trading hours as investors awaited US Personal Consumption Expenditures (PCE) data release later in the day.
US Treasury Secretary Scott Bessent's comments last week hinted at the possibility of expanding long-term bond buyback programs, which could weigh on the US Dollar against the Euro. Bessent mentioned tapping into the department's nearly $1 trillion General Account to fund these buybacks instead of issuing short-term bills.
However, escalating tensions in the Middle East due to the US threat of severe sanctions against countries maintaining ties with Iran may boost safe-haven flows and support the Greenback. Meanwhile, Tehran vowed retaliation against any country participating in the US-led isolation campaign.
Strategists at Scotiabank noted that recent yield spread recoveries have provided fundamental support to the Euro, but cautioned that there is little scope for additional near-term strength due to the currency's slight premium above their estimated fair value of $1.1622.