EUR / USD Falls Toward 1.0530 As Fed Chair Powell Endorses Larger Rate Increases

In the Asian session, the EUR / USD pair broke below the consolidation around 1.0550 to the downside. It appears that the major currency pair has resumed its decline, and further losses are anticipated due to negative market sentiment. The shared currency pair is anticipated to find support near 1.0530.

Futures on the S&P 500 have lost their dead cat rally as the risk-aversion theme strengthens. The US Dollar Index (DXY) has already extended its upside to a three-month high above 105.60, and gains are anticipated due to a general improvement in the appeal of safe-haven assets. The 10-year US Treasury yield has surpassed 3.97 percent.

As a result of Federal Reserve (Fed) chief Jerome Powell's exceedingly hawkish testimony before Congress, recession fears in the United States economy have increased, which has strengthened the US Dollar. Powell, the head of the Fed, believes that raising interest rates is "fit and appropriate" for taming the country's soaring inflation. He has affirmed that the current monetary policy is insufficiently restrictive to reduce inflation to the targeted levels.

The extraordinary increase in payrolls reported in January has prompted consideration of a higher termination rate than previously anticipated. Prior to this, Fed Governor Christopher Waller stated that February's economic data was a one-time anomaly and that price pressures will resume their downward trend beginning next month. Consequently, investors will gain greater insight following the release of the US Automatic Data Processing (ADP) Employment Change (Feb) data, which is anticipated to be higher at 200K compared to the previous release of 106K.

On the Eurozone front, investors are focusing on German Retail Sales (January) data. The monthly data is anticipated to show an expansion of 2.0% compared to the 5.3% contraction previously reported. As a result, inflationary pressures could intensify as a rebound in retail demand could propel the German Consumer Price Index (CPI) forward.

Klaas Knot, a policymaker at the European Central Bank (ECB), stated on Tuesday that the ECB is likely to continue raising interest rates for "quite some time" after March. According to him, the present rate of rate increases could continue into May if underlying inflation does not significantly decrease.