EURO RATE TALKING POINTS
EUR/USD attempts to retrace the decline triggered by the stickiness in the US Consumer Price Index (CPI) as it trades back above parity, but the Federal Reserve interest rate decision may influence the near-term outlook for the exchange rate as the central bank is expected to retain its current approach in combating inflation.
FUNDAMENTAL FORECAST FOR EURO: NEUTRAL
EUR/USD consolidates after clearing the opening range for September, and the exchange rate may stage another attempt to test the 50-Day SMA (1.0096) as it holds above the yearly low (0.9864).
However, EUR/USD may continue to track the negative slope in the moving average as the Federal Open Market Committee (FOMC) is expected to deliver another 75bp rate hike, and the committee may prepare US household and businesses for a further rise in US interest rates as “participants judged that moving to a restrictive stance of policy was required to meet the Committee's legislative mandate.”
As a result, a 75bp rate hike along with a hawkish forward guidance may produce a bearish reaction in EUR/USD as the European Central Bank (ECB) shows little interest in implementing a restrictive policy, and it remains to be seen if the fresh projections from Chairman Jerome Powell and Co. will influence the near-term outlook for the exchange rate as the central bank is slated to update the Summary of Economic Projections (SEP).
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