EURUSD – Talking PointsEURUSD lacks direction below 0.9700 psychological levelAggressive Fed keeps pushing USD higher as inflation remains hotECB’s Knot hints at more “supersized” rate hikes in months aheadAfter a rough start to the month for EURUSD, the cross appears to have found some footing around the 0.9700 psychological level ahead of tomorrow’s major US CPI report. This morning saw the release of US PPI data, which came in hotter than expected.
On the other side of the pond, aggressive remarks from Federal Reserve speakers continues to limit EURUSD upside. Recently, Fedspeak has forced home the idea that the Fed has no intention of pivoting policy anytime soon, as inflation remains well above target.
Neel Kashkari of the Minneapolis Fed stated this morning that he expects the fed funds rate to reach 4.5% in 2023, with the benchmark rate remaining elevated for some time. Given the strong standing of the US economy, the Federal Reserve can afford to remain hawkish for longer than the rest of G7. With this in mind, the US Dollar may continue to rise as it not only benefits from widening rate differentials, but eventually a potential “flight to safety” should a severe global recession materialize.
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