The EURUSD could respond to Tuesday’s US inflation news.
On Tuesday, the EURUSD finds demand as investors alter their positions ahead of the highly anticipated central bank policy announcements. The EURUSD pair has piqued investors’ interest amid a stronger risk-aversion. Theme and expectations of a reduction in the Federal Reserve (Fed)-European Central Bank (ECB) policy divergence.
The Euro’s performance is anticipated to be influenced by President Lagarde’s announcement of the June interest rate decision. In the second half of the week. While the US Dollar’s volatility will rise. As the Federal Reserve announces its interest rate policy, Wednesday is the day. However, substantial trading is expected in the EURUSD pair. Following the release of the US Consumer Price Index (CPI) data (May).
The Euro maintains its lead above US inflation.
Market traders are completely focused on US inflation data since it will provide important insight about the Fed’s strategy.
Monthly headline inflation is predicted to accelerate at a 0.2% rate, somewhat slower than the 0.4% rate reported in April. However, the monthly rate of core CPI, which excludes oil and food prices, is expected to remain stable at 0.4%.
Headline inflation is predicted to fall considerably due to a negative impact from the energy component. While core CPI is expected to remain stable due to strong demand for goods. Products and services.
A soft reading of US CPI would strengthen. The case for the Federal Reserve to announce a neutral interest rate policy. As other factors such as employment and economic activity support. The unmodified interest rate decision case.
Former Dallas Fed President Robert Kaplan indicated.
The US unemployment rate has risen to 3.7%. And weekly initial jobless claims have been growing for the past three weeks in a row. US factory activity has been declining for the past seven months, while the service sector has hardly expanded.
Former Dallas Fed President Robert Kaplan indicated in an early Tuesday interview that he would back a “hawkish pause” at this week’s meeting.
Fed Chair Jerome Powell stated that future interest rate hikes are less likely due to restrictive lending conditions imposed by the United States. Inflationary pressures are being resisted by commercial banks.
On June 21, US President Joe Biden will announce the Federal Reserve Vice Chair and fill the vacant Fed Board position before the Senate Banking Committee. Fed Governor Philip Jefferson is slated to be the next vice chair, and economist Adriana Kugler would fill an available Fed Board position.
Despite growing fears of a European recession, ECB President Christine Lagarde is anticipated to hike interest rates by 25 basis points (bps) to 4.25%.
The final measurement of the Eurozone’s Q1 GDP (GDP) decreased by 0.1%, owing to consistently falling manufacturing activity.
After two straight quarters of shrinkage, the German economy has already entered a recession.
The Fed raising interest rates The ECB and the Fed maintaining their current policy stances would reduce the ECB-Fed policy divergence.
In the midst of strong market sentiment, the US Dollar Index is attempting to defend its immediate support level of 103.35.
Technical Outlook
The Euro is boldly driving the main currency pair up in a Rising Channel chart pattern on a four-hour period, with market participants viewing each corrective move as a buying opportunity.
The EURUSD has retested its three-week high around 1.0800, although the 200-period Exponential Moving Average (EMA) at roughly 1.0800 may function as a barrier for Euro bulls.
Buyers may become more interested if the EURUSD remains comfortably above 1.0800. If the major currency falls, the bullish bias could be undermined. The pair falls below the June 12 low of 1.0733.
