- EUR/USD is aiming to recapture the 1.0600 resistance as hawkish ECB bets are solid despite brewing Eurozone banking system troubles.
- Despite the turmoil in the banking sector, ECB policymakers expect inflation to remain too high in the Eurozone.
- Fed Powell is expected to halt the rate-hiking spell or to announce a small rate hike to keep pressure on US inflation.
The EUR/USD pair is juggling in a narrow range near 1.0580 in the early Tokyo session after a recovery move from below 1.0520. The major currency pair is likely to recapture the round-level resistance of 1.0600 as the European Central Bank (ECB) is expected to continue its 50 basis points (bps) rate hike spell.
It looks like ECB President Christine Lagarde would hike interest rates by 50 bps consecutively for the third time to 3.5% while ignoring the Credit Suisse fiasco as inflationary pressures in the Eurozone economy have not eased yet. Eurozone inflation is still operating at elevated levels and will take sufficient time in softening amid solid labor demand.
Reuters reported that “Despite the turmoil in the banking sector, policymakers expect inflation to remain too high in the Eurozone.” Additionally, the Governing Council doesn't want to damage its credibility by ditching the 50 bps rate increase after having repeatedly noted that this was their intention.
S&P500 futures are showing minor gains in early Asia after a sell-off on Wednesday, propelled by material weakness in Credit Suisse's internal financial reporting. A minor recovery in the 500-US stocks futures basket could be a dead cat bounce as the risk-aversion theme is quite healthy.
The US Dollar Index (DXY) has dropped to near 104.70 after facing barricades around 105.00, however, the upside seems favored amid the risk aversion theme. Good days for the USD Index look counted as the Federal Reserve (Fed) is expected to sound less hawkish while announcing its interest rate decision next week. After considering financial stress in the United States economy led by Silicon Valley Bank (SVB) collapse and softening of Consumer Price Index (CPI), Fed chair Jerome Powell is expected to halt the rate-hiking spell or announce a small rate hike to continue weighing pressure on the stubborn inflation.
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