EURUSD Lower Ahead of ECB/Fed Speakers
Hawkish Fed Expectations
EURUSD is falling today ahead of keenly awaited speeches from both ECB’s Lagarde and Fed’s Warsh. Hawkish Fed expectations have propelled USD higher in recent weeks with traders now pricing in a more than 80% chance of a hike by year end. This comes on the back of the firmly hawkish June FOMC meeting which saw nine out of eighteen members cite projections for at least one hike this year, up from zero members in March. In light of this shift, risks are seen on the hawkish side for Warsh’s speech today with USD likely to find fresh demand into tomorrow’s headline NFP data where any upside surprise could se the tone for the next leg higher in USD (lower EURUSD).
Eurozone CPI Falls Again
For Lagarde, the expectations are a little muddier. The latest eurozone flash CPI print this morning showed inflation cooling again the single customs union with CPI printing 2.4% from 2.6% prior, below the expected 2.5%. With inflation cooling recently, traders have begun questioning the projected rate path for the ECB over the remainder of the year. However, the ECB itself has been careful not to downplay inflation risks in a bid to avoid any adverse currency reaction. Any softening in tone from Lagarde today could play into a deeper push lower in EURUSD if accompanied by any hawkishness from Warsh.
Technical Views
EURUSD
The sell off in EURUSD has seen the market falling below the 1.1404 level with the subsequent rebound failing and price now back below the level. While below here, focus is on a continuation lower with 1.1206 the deeper bear target to note.
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