EUR/USD Mixed After the Central Bank Blitz
EUR/USD Analysis
Both the US Federal Reserve and the European Central moderated their pace of tightening this week, with rate hikes of half-percentage point each, downshifting from a series of outsized 0.75% moves. However this was accompanied by hawkish rhetoric and guidance, pointing to more rate increases ahead.
Chair Powell said that the bank still has "some ways to go" on rates and stressed the need for maintaining a restrictive policy stance "for some time". More to it, officials revised higher the terminal rate projection, now expecting a median of 5.1% by the end of 2023. This is a significant bump over the previous forecast and implies another 75 basis points of hikes. [1]
The ECB however appeared to be even more aggressive and out-hawked the Fed, saying that interest rates will need to rise "significantly at a steady pace". This means hikes "at a 50-basis-point pace for a period of time" according to Ms Lagarde [2], suggesting potentially another 100 basis points of increases.
The central bank activity created EUR/USD volatility, but did little in the way of providing direction, as markets digest the news and try to assess the credibility of their guidance. The pair runs its third straight profitable month and this latest round of decisions did not offer something to reverse the positive bias, since the ECB seemed more hawkish and has more ground to cover compared to its US counterpart.
Yesterday it set new six month highs, which gives it the ability to push for 1.0787, although further advance towards and beyond 1.0942 has a higher degree of difficulty.
On the other hand, the Fed also pledged to keep tightening, while the economic slowdown could spark risk-aversion, which would be be more likley to benefit the greenback. Furtermore, EUR/USD faces pushback around the 38.2% Fibonacci of the 2021 High/2022 low drop. This creates risk for downside test of 1.0500, but a catalyst will be needed for the EMA200 (1.0370-60) to be challenged.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 16 Dec 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20221214.htm | |
| Retrieved 12 Apr 2026 https://www.ecb.europa.eu/press/pressconf/2022/html/ecb.is221215~197ac630ae.en.html |
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