The EUR/USD remains under pressure, trading around 1.0710, following a reversal from 1.0760. The currency pair is experiencing bearish pressure for the fifth consecutive day, reflecting the hawkish comments from the European Central Bank (ECB) and the Federal Reserve (Fed) policymakers. In this article, we’ll dive into the recent statements made by Fed and ECB policymakers, how the comparison of upbeat US data to lighter EU statistics is affecting the EUR/USD price, and the potential impact of upcoming economic releases on the currency pair.
ECB and Fed Policymakers Speak Out:
Federal Reserve Governor Christopher Waller recently teased a long fight with a 2.0% inflation target, mentioning that tighter monetary policy may be needed for a longer period of time. Governor Lisa Cook also spoke about the central bank’s focus on restoring price stability and the need for a restrictive monetary policy for some time. New York Federal Reserve President John Williams, on the other hand, mentioned that the labor market is still very strong and that the central bank has more work to do on rates. He added that the path of rate hikes will be determined by the data.
On the ECB side, policymaker Klaas Knot stated that headline inflation appears to have peaked but added that keeping the current pace of hikes into May could be needed if underlying inflation does not materially diminish.
Upbeat US Data vs Lighter EU Statistics:
The recent statements from Fed policymakers, along with Friday’s upbeat US jobs report and activity data, contrast with the comparatively lighter EU statistics. This contrast is adding to the Fed’s hawkish stand and exerting downside pressure on the EUR/USD price.
Impact of Upcoming Economic Releases:
Preliminary readings of Germany’s harmonized Index of Consumer Prices for January and the quarterly prints of the European Commission’s Economic Growth Forecasts will soon be released. These economic releases have the potential to entertain EUR/USD traders and potentially shift the direction of the currency pair.
An 11-week-old ascending support line and the 50-day Exponential Moving Average (EMA) highlight 1.0670-65 as a critical level for the bear’s conviction.
In conclusion, the EUR/USD remained pressured around the 1.0710 level as bears continue to dominate the market for the fifth consecutive day. The comparatively upbeat US data compared to Europe is playing a significant role in supporting the hawkish comments from Federal Reserve policymakers and weighing on the EUR/USD price. Several Fed policymakers, including Federal Reserve Governor Christopher Waller and New York Federal Reserve President John Williams, have hinted at a long fight with a 2.0% inflation target, which highlights their intention to maintain a restrictive monetary policy. On the other hand, ECB policymaker Klaas Knot has acknowledged that headline inflation appears to have peaked, but added that keeping the current pace of hikes into May could be necessary if underlying inflation does not significantly diminish.
Furthermore, the rebound in US 10-year Treasury bond yields and the negative closing of Wall Street also weighed on the EUR/USD prices. The upcoming release of Germany’s harmonized Index of Consumer Prices for January and the European Commission’s Economic Growth Forecasts will provide further insight into the EUR/USD market and traders should keep a close eye on these events.
In conclusion, the Fed’s hawkish stand, the contrast in economic data between the US and Europe, and the rebound in US bond yields are all factors that are currently putting downward pressure on the EUR/USD price. However, with several key events on the horizon, traders should remain vigilant and stay informed to make informed investment decisions.