Published on 16.06.2022 11:23

The Euro has entered the European trading session today on the back foot against the US dollar and has continued losing ground as the day progresses heading towards the $1.0400 mark, near a one-month low touched the previous day.

The greenback managed to make a solid comeback and reversed the overnight post-FOMC losses amid a fresh wave of the global risk-aversion trade and as market participants digested the unexpected 75 basis point rate hike by the US Federal Reserve in their latest interest rate decision

This was followed by a pledge from Fed president Jerome Powell who noted in the following monetary statement after the rate decision that the market should expect another rate hike of between 50 and 75 basis points next month

He also projected a slowdown in the economic growth and rising unemployment in the months to come against a backdrop of global supply chain disruptions caused by the Conflict between Ukraine and Russia and the COVID-19 outbreak in China. The gloomy outlook further fueled recession fears and took its toll on the risk sentiment and gave the greenback a further boost as a safe haven asset.

With the Feds intensions regarding further rate hikes now known to the market the attention has now turned to the European Central Bank and what their plans are regarding future rate hikes. Due to the recent hawkish stance of some ECB board official’s money markets are now pricing in around 190 basis points of rate hikes by December, compared to 140 basis points on Wednesday, Reuters reported on Thursday.

Looking further ahead today, the main drivers of the EUR/USD currency pair will be the release of key data out of the US during the American session such as the latest building permits figure and housing starts numbers which are key indicators of the real estate sector.

To finish off the day the market will await the latest initial Jobless claims figures and continuing jobless claims numbers which will be closely monitored by US Federal reserve board members as a robust jobs market is a prerequisite for any future rate hikes from the Fed.


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