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EUR/USD Trades in a Tight Range Amid ECB and Fed Expectations

Published by
Nonhlanhla P Dube
  • EUR/USD buyers are back, and the currency pair is now trading at the 1.0980 region on Thursday, showing renewed upside momentum, although gains are still limited by the psychological 1.1000 neighborhood.
  • There are no strong drivers for the price action on both sides of the ocean, leaving investors to look to the ECB and the Federal Reserve for potential next steps regarding the ongoing normalization of monetary conditions.
  • Moving forward, hawkish ECB-speak continues to favor further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region. The price action around the single currency should continue to closely follow the dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.

EUR/USD buyers are back and have managed to push the currency pair to the 1.0980 region on Thursday, marking a renewed upside impulse. However, gains remain limited by the psychological 1.1000 neighborhood, and price action continues to be range-bound and choppy. There are no strong drivers for the price action on both sides of the ocean, and investors are now looking to the European Central Bank (ECB) and the Federal Reserve for potential next steps regarding the ongoing normalization of monetary conditions.

Investors see both central banks hiking interest rates by 25 basis points at their meetings in May. On the data front, the ECB will release its Accounts of the March gathering, while the EMU Balance of Trade results and the flash Consumer Confidence are also due later in the session. In the US, usual weekly Claims are next on tap, seconded by the Philly Fed Manufacturing Index.

Moving forward, hawkish ECB-speak continues to favor further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region. The price action around the single currency should continue to closely follow the dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.

Key events in the euro area this week include ECB Accounts, EMU Flash Consumer Confidence on Thursday, and Advanced Manufacturing/Services PMIs on Friday. Eminent issues on the back boiler include the continuation of the ECB hiking cycle, the impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region, and the risks of inflation becoming entrenched.

EUR/USD levels to watch show that the pair is gaining 0.7% at 1.0972, and a break above 1.1075 (2023 high April 14) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022). On the opposite hand, there is initial support at 1.0831 (monthly low April 10) seconded by 1.0788 (monthly low April 3) and finally 1.0757 (55-day SMA).

Nonhlanhla P Dube

Nonhlanhla P Dube is a senior news reporter at Rateweb. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her directly by email at nonhlanhla@rateweb.co.za

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Published by
Nonhlanhla P Dube

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