ECB Fails To Lift EUR As USD Rebounds
Hawkish Hike From ECB
EUR bulls will be a little frustrated today that yesterday’s ECB meeting didn’t result in better upside. The ECB delivered a further .25% rate hike yesterday, in line with expectations, while keeping the door to further easing firmly open. The bank revised higher its inflation forecasts amidst the persistent threat from higher energy prices as a result of the ongoing US/Iran war. Growth forecasts were also revised higher, creating a firmly hawkish set of staff projections and, with inflation in particular forecast to remain above target, the prospect of a further hike this year now looks a lot more reasonable than it did ahead of the meeting. Indeed, with oil prices surging back up to their highest levels in months this week, upside risks are now squarely back in the spotlight.
USD Recovery Blunts EUR Rally
It was, however, that same spike in oil prices which looks to have blunted the upside reaction in EUR. USD was seen rebounding yesterday amidst a fresh spike in bond yields as traders moved back into the greenback as a safe-haven play. While this dynamic remains in play, EUR might struggle to fully benefit from yesterday’s hawkish update, particularly if the Fed hikes rates next week. With that in mind focus is now on today’s US CPI release which is seen as the final decider for the September FOMC.
Technical Views
EURUSD
Price remains above the 1.16 level here but momentum studies are weakening and risks of a downside break are growing. If we do push lower, 1.1490 is the next support to note while to the topside 1.1756 is the next bull target if buyers can regain momentum here.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.