EUR/USD inches above 1.0700 amid subdued DXY, US GDP and PCE eyed
|- EUR/USD is struggling to sustain above 1.0700 as a rate hike expectation by the ECB has strengthened.
- The DXY consolidates despite the hawkish FOMC minutes.
- The US GDP and PCE are seen stabled at -1.4% and 7.0% respectively.
The EUR/USD pair is hovering around 1.0700 at the press time but is expected to establish above the same, comfortably, amid subdued performance from the US dollar index (DXY). The shared currency bulls are swiftly scaling higher after sensing a cushion from its crucial support at around 1.0640.
Bolstered rate hike expectations by the European Central Bank (ECB) have underpinned the euro against the greenback. Inflation is affecting the real income of the households in the eurozone and the ECB has yet not paddled up its interest rates unlike the other Western leaders, which are featuring 50 basis points (bps) rate hikes. The eurozone inflation has reached 7.5% and the ECB needs to tighten its sleeves and announce quantitative restrictions.
Meanwhile, Dutch Central Bank head and ECB Governing Council member Klass Knot stated on Wednesday that inflation expectations will remain well-anchored at its upper limit and a rate hike by 50 bps is not off the table.
On the dollar front, the DXY is underperforming broadly despite the release of the extremely hawkish Federal Open Market Committee (FOMC) minutes. As per the minutes, all Fed policymakers were in favor of a jumbo rate hike announcement. Also, they believe that the benchmark rates should be sent close to the neutral rates quickly. Inflation will remain anchored at elevated levels and the labor market is extremely tight.
Going forward, investors will respond to the US Gross Domestic Product (GDP) and Personal Consumption Expenditure (PCE) numbers. The US GDP is seen unchanged at -1.4% on annual basis. Also, the US PCE is expected to remain stable at 7%.
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