As Fed and ECB policy stances differ, EURUSD moves closer to 1.0900

• In the risk-on market environment, EUR/USD is aiming for a retest of 1.0900.
• The ability of investors to take risks is once again increasing as the Fed considers slowing down the pace of policy tightening.
• The ECB appears prepared to raise interest rates by another 50 basis points to 3.25%.

In the Asian session, the EURUSD pair wants to continue moving toward the 1.0900 round-level resistance. The asset has become stronger as the risk-on instinct has started to gather up steam once more. The demand for the main currency pair is increasing, which is causing the Federal Reserve (Fed) and European Central Bank (ECB) to take divergent positions on raising interest rates.

The likelihood that the Fed will raise interest rates by 25 basis points (bps) at its forthcoming meeting in February has increased, which has caused the US Dollar Index (DXY) to decline further to close to 101.50. Additionally, the 10-year US Treasury rates are already close to 3.51%. Low retail demand, healthy employment decline, Although a decline in economic activity and companies providing goods at reduced prices at factory gates are having an effect on the US economy, they are boosting the Federal Reserve in its fight against rising inflation.

Rising hopes that the Federal Reserve (Fed) would scale back the magnitude of the interest rate increase as a result. In order to considerably reduce inflationary pressures in the Eurozone, ECB President Christine Lagarde and her colleagues support further higher interest rate rises.

According to Reuters, ECB policymaker Peter Kazimir stated on Monday that while the reduction of inflation was welcome news, it was not a justification for slowing the rate of interest rate increases. “I am certain that we need to,” he continued, produce two further 50 basis point (bps) increases.

The European Central Bank (ECB) is projected to raise rates by an additional 50 basis points at its February monetary policy meeting, according to the most recent Reuters poll of analysts, even though the target interest rate is predicted to reach 3.25% by the middle of the year.