Peter Bukov
Axiory Global Ltd.
The EURUSD pair traded flat during the US session on Friday, hovering near its multi-month lows at 1.115 as the pair has declined sharply this week, following the FOMC decision.
The last time the euro traded at these levels was June 2020.
Investors paid attention to some US macro events today, namely personal spending, which crashed from 0.4% to -0.6% in December (despite the holiday season), while personal income also fell from 0.5% to 0.3% (real income fell further due to soaring inflation).
Today's fourth-quarter Employment Cost Index (wages and benefits measures) declined somewhat to 1.0%, down from 1.3% previously (still the second-highest since 2006). On a yearly basis, employment costs rose 4.0% - the highest since 2001.
Finally, the Fed's favorite inflation indicator - Core PCE Deflator - surged more than expected to +4.9% year-on-year, its highest since April 1983. After the data, the market is now pricing in 5 full rate hikes by year-end, with the 50 bps hike in March getting some increased probability as well.
The next support could be found near the psychological level of 1.10. Considering the massive divergence between the Fed and ECB, it could be reached pretty quickly.
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