The Euro exhibited a certain degree of price instability at the beginning of the prior week but has since remained relatively stable, hovering around the 1.0.7 level. Notably, the upcoming Tuesday will feature the release of key Purchasing Managers’ Index (PMI) data for both the Eurozone and Germany, which will provide valuable insight into the current state of these crucial economic indicators.
ECB Hints at Further 50 Basis Point Increase in Interest Rates
Last week, ECB President Christine Lagarde made a clear announcement to EU lawmakers that “in view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March”. This statement was intended to reduce confusion about the central bank’s plans for the future, with the ECB to then evaluate future moves. Despite recent decreases, inflation remains high with headline inflation falling to 8.5% in January, but still above the acceptable range. The ECB remains focused on taming inflation with a hawkish stance for the near future.
The US Federal Reserve has also been emphasizing the need for further rate hikes due to the high inflation rate. As a result, investors are worried that the Fed will make good on these statements, leading to a decrease in risk sentiment and an increase in the value of the US dollar. Although investors were hoping that the March rate increase would be a ‘one and done’, it appears that the Fed will continue raising rates into the second quarter. According to CME’s FedWatch, the market has priced in an 83% chance of a 25-bp hike and a 17% chance of a 50-bp increase.
Charting the Course of EUR/USD: Technical Analysis and Trends
The resistance level of 1.0704 is being tested by the EUR/USD pair, while the subsequent resistance level lies at 1.0795. On the downside, the pair has support at 1.0604 and 1.0513.