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EUR/USD Maintains Its Defensive Stance And Trades Just Above 1.0600 In Advance Of Eurozone CPI
During the Asian session, EUR/USD falls a few basis points due to the emergence of USD dip-buying. Anticipations that the ECB will cease increasing interest rates additionally serve to restrict the pair's gains. Currently, traders await the live Eurozone CPI print before analysing the US macro data for some impetus.
Amid a moderately negative tendency during Tuesday's Asian session, the EUR/USD pair struggles to capitalise on the positive movement of the previous day. However, spot prices maintain their position above the rounded figure of 1.0600 and continue to be influenced by the price dynamics of the US Dollar (USD).
The anticipation of additional policy tightening by the Federal Reserve (Fed) continues to bolster the value of US Treasury bonds and facilitate dip-buying, which is perceived as a headwind for the EUR/USD pair. This, coupled with anticipations that the European Central Bank (ECB) might abstain from implementing further rate increases, additionally contributed to the capping of spot prices.
The predictions were validated by data indicating that German consumer inflation slowed to 3.0% in October, the lowest level since August 2021, from 4.3% year-over-year. This is in addition to the imminent hazards of a recession and indicates that the ECB's rate-hiking cycle may have concluded. The markets, on the other hand, are factoring in the potential for the Federal Reserve (Fed) to implement an additional rate increase in 2023.
Investors appear certain that the Federal Reserve will maintain its hawkish posture despite the resilience of the U.S. economy and persistent inflation. As a result, the outcome of the eagerly awaited two-day FOMC monetary policy meeting will continue to be the primary focus. It is widely expected that the US central bank, which will declare its decision on Wednesday, will maintain the status quo for the second consecutive meeting.
Meanwhile, market participants will seek indications regarding the trajectory of future rate hikes by the Federal Reserve. This will impact the dynamics of the USD pricing and infuse renewed momentum into the EUR/USD pair. In the interim, short-term opportunities will be evaluated Tuesday's publication of the flash Eurozone CPI prior to the US macro data, which include the Chicago PMI and the Conference Board's Consumer Confidence Index.
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