EURUSD has been restricted to a small trading band.
The EURUSD pair extends its sideways consolidative price move during the Asian session on Tuesday. Trading below the previous day’s high of September 13. Spot prices, on the other hand, manage to stay above the 1.0700 level. And remain at the mercy of the price dynamics of the US Dollar (USD).
The USD recovers further from a multi-week low, limiting the pair’s upward potential.
The USD Index (DXY), which measures the value of the US dollar against a basket of currencies. Builds on the overnight recovery from a near-term low. It has reached an eight-week low and has proven to be a significant element acting. As a headwind for the EURUSD pair. Federal Reserve (Fed) officials sent mixed signals about the route of future rate hikes. Prompting a goodish move up in US Treasury bond rates on Monday and some USD short-covering.
Fed Governor stated central bank’s current target interest rate is sufficient to bring inflation.
Fed Governor Lisa Cook stated that the central bank’s current target interest rate is sufficient to bring inflation to the Fed’s 2% target. But we would remain watchful to ensure that the inflation target is met. Separately, Minneapolis Fed President Neel Kashkari stated. That he would prefer overtighten monetary policy than not do enough to reduce inflation to the central bank’s target. 2% is the aim.
This adds to the uncertainties around the Fed’s next policy action. Indeed, investors appear to be convinced. That the US Federal Reserve is reaching the end of its rate-hiking cycle. And the lower US jobs data on Friday supported their beliefs. Furthermore, current market pricing suggests that the Fed will decrease rates in June 2024. As a result, the spotlight will be on Fed Chair Jerome Powel’s appearances on Wednesday and Thursday.
Meanwhile, European Central Bank (ECB) President Christine Lagarde’s hawkish views over the weekend bolstered the shared currency and helped restrict the EURUSD pair’s decline. Lagarde repeated the central bank’s determined path in an interview with Kathimerini, saying, “We are committed.” determined to keep inflation at 2%. This is preventing traders from placing bearish bets on the major.
Investors are now looking forward to the publication of Chinese Trade Balance data.
Market investors are now looking forward to the publication of Chinese Trade Balance data, which may influence broader risk sentiment, as well as German Industrial Production, which may provide some impetus ahead of the US Trade Balance report.
Aside from that, traders will be influenced by statements by a plethora of prominent FOMC members. This, in turn, will increase USD demand and allow traders to take advantage of short-term chances in the EURUSD pair.
