The EUR/USD declines for a sixth consecutive day and parity is looking more and more likely as the instrument drops a further 50 PIPs over the past few hours. The price movement has managed to cross onto a lower price swing and to a new low this morning.
It is well known that the US Dollar has been significantly increasing in value over the past 2 months due to the Fed hiking the Federal Fund Rate, but what’s been driving its price over the past 24 hours?
The latest EUR/USD price movement has mainly been triggered by the speeches of the Fed officials that took place last night. The market was primarily concentrating on the speeches of Mr Waller and Bullard who are known to be some of the most influential members of the central regulator.
Over the past 2 weeks, the market has been contemplating whether the Federal Reserve will increase the Fund Rate by 50 basis points or 75 basis points. So far, the Fed Chairman has been unwilling to provide concrete indications as to which of the two is more likely as it, of course, also depends on the level of inflation witnessed in June 2022. However, Mr Waller and Bullard both seemed certain and determined on the matter during last night’s speeches.
Mr Waller advised that he’s “definitely in support of doing another 75 basis point hike in July, probably 50 in September,” and Mr Bullard echoed the sentiment, saying that he is committed to a 75 basis point rate hike. Both officials also advised that further rate hikes are likely even if it results in economic contraction. In the past, central banks have triggered economic decline in order to lower demand and inflation, but how far will the Fed go?
The White House has advised that President Biden is also considering removing certain tariffs on certain goods and services from China. The move is aimed at not only supporting the economy, but it is also an attempt to bring inflation down. However, it should be noted that this has not yet been confirmed as an agreed course of action.
In general, the Eurozone remains under pressure due to global inflation and disruptions in the supply of raw materials and components. However, economists advise that the current economic figures and activity remain positive - possibly only due to the tourist season where the Eurozone sees increased economic activity. But an imminent shortage of energy resources for the needs of European industry cannot be ruled out, as it is rumored that Russia is preparing to temporarily suspend gas transportation via specific routes.
Also pressuring the Euro is the European Central Bank who has advised Eurozone banks to consider recession risk when calculating the number of dividends they can pay shareholders.
Today, the markets will mainly be concentrating on the US’s latest employment figures, ECB President’s Speech and European Economic Projections.
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