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Bears Are Prompted To Sell EUR/USD above 1.0900 as ECB Hawks Obtain Greater Acceptance Than Fed Hawks
The EUR/USD gains offers to recoup recent losses as the market consolidates following a sluggish calendar and US holiday. ECB Officials defend hawkish bias despite lacklustre bloc statistics. Challenges to sentiment and Fed comments exert a downward force on the Euro price. According to Fed Chair Jerome Powell's testimony, PMIs are essential for short-term directions.
EUR/USD repels bears at the highest levels in five weeks, halting a two-day decline, as it recovers to 1.0925 in the early hours of Tuesday's Asian session. This justifies the hawkish signals from European Central Bank (ECB) Officials. Notably, Federal Reserve (Fed) updates have also been indicating higher interest rates. However, the US central bank's halt on rate hikes in the past week, coupled with mixed US data, has raised doubts about the Fed's ability to raise interest rates.
Peter Kazimir, a policymaker at the European Central Bank (ECB), stated on Monday, "We need to raise rates again in July." According to Reuters, ECB Chief Economist Philip Lane stated that another rate hike in July seemed appropriate but that the September decision would depend on incoming data. In addition, Isabelle Schnabel, a member of the ECB's Governing Council, stated, "The risks to the inflation outlook are tilted to the upside." Schnabel of the ECB also mentioned the need to continue to raise interest rates until there is convincing evidence that developments in underlying inflation are consistent with a return of headline inflation to 2%.
On the other hand, the Fed reports to Congress on its monetary policy, and the most recent comments from Fed officials have been hawkish. According to Reuters, the Fed's policy report to Congress stated, "Inflation in the United States is well above target and the labour market remains very tight," which supported the US Dollar Index (DXY). Thomas Barkin, president of the Federal Reserve Bank of Richmond; Austan Goolsbee, president of the Federal Reserve Bank of Chicago; and Christopher Wallin, governor of the Federal Reserve, all appeared somewhat hawkish and helped the dollar index recover from a multi-day low.
Aside from the ECB-Fed game, the market's concerns of a slowing economic recovery amid higher rates appear to have exerted downward pressure on the EUR/USD exchange rate, particularly in the context of rising yields in the Eurozone and the United Kingdom and falling equities. Notable is the fact that the US Dollar Index (DXY) has risen in the past two days after falling to its lowest level in a month, falling to 102.45 at the latest.
The Juneteenth holiday in the United States was also marred by the escalation of tensions between the United States and China over Taiwan, as well as concerns about China's inability to propel its development trajectory. It is noteworthy that the US National Association of Home Builders (NAHB) survey increased to 55.0 in June from 50.0 in May, signifying the highest level in 11 months and favouring the DXY to climb prior to the most recent retreat.
Traders of the EUR/USD pair may be interested in a return of full markets in the future, as the US housing statistics are on the calendar to monitor. Nonetheless, Fed Chair Jerome Powell's Testimony and preliminary readings of June's PMIs will garner the most attention for a crystal-clear short-term outlook.
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