Introduction
The EUR/USD currency pair has been on the rise for the fourth session in a row, consolidating its recent breakout above the psychological 1.1000 hurdle. The dollar’s persistent weakness has been driving the pair’s weekly leg higher, with investors betting that the Federal Reserve may halt its hiking cycle soon. In this article, we will discuss the factors behind the EUR/USD’s rise and what to expect in the coming weeks.
The Fed’s Hiking Cycle
The Fed has been gradually hiking its benchmark interest rate, the Federal Funds Target Range (FFTR), over the past few years. The FFTR currently stands at 2.25-2.50%, and the market is expecting the Fed to raise it by another 25 basis points at its May gathering. However, some investors are beginning to speculate that the Fed may pause its hiking cycle after May, citing concerns about the global economic slowdown and low inflation.
Investors’ Perception
The EUR/USD’s recent rise has been underpinned by investors’ perception that the Fed may halt its hiking cycle in the near term. This perception is based on several factors, including the recent dovish turn by some Fed officials, such as Chair Jerome Powell and Vice Chair Richard Clarida, who have hinted that the Fed may take a more patient approach to monetary policy.
In addition, investors are closely watching economic data releases for signs of a slowdown in the US economy. Recent data releases, including weaker-than-expected retail sales and industrial production, have raised concerns about the health of the US economy and reinforced the perception that the Fed may pause its hiking cycle.
Impact on the EUR/USD
The EUR/USD has been one of the biggest beneficiaries of the weakening dollar and the perception that the Fed may pause its hiking cycle. The currency pair has risen from a low of 1.1176 on April 2 to a high of 1.1324 on April 12, a gain of over 1%.
The rise in the EUR/USD has also been supported by the eurozone’s economic data, which has been generally positive. Recent data releases, including stronger-than-expected PMI readings and better-than-expected GDP growth in the eurozone, have helped to boost the euro.
What to Expect
In the coming weeks, investors will be closely watching for any signals from the Fed about its future monetary policy. The market will be looking for clues about whether the Fed is likely to pause its hiking cycle after May or continue to raise rates.
In addition, economic data releases will continue to be closely watched for signs of a slowdown in the US economy. Any further signs of weakness could reinforce the perception that the Fed may pause its hiking cycle and provide further support to the EUR/USD.
Conclusion
The EUR/USD currency pair has been advancing for four consecutive sessions as investors speculate that the Fed may halt its hiking cycle in the near term. The rise in the EUR/USD has been underpinned by several factors, including the recent dovish turn by some Fed officials and concerns about the health of the US economy. In the coming weeks, investors will be closely watching for any signals from the Fed about its future monetary policy and economic data releases for signs of a slowdown in the US economy.
