EUR/USD Weighed by the Fed’s Hawkishness, as US CPI Looms
EUR/USD Analysis
The pair had managed to stage a recovery recently, on the back of hawkish commentary by ECB officials and a moderation in market expectations around the Fed's policy path. This reaction was limited however, as the Fed reasserted its aggressive tightening approach, late-last week and into the new one.
Vice-Chair Brainard stressed on Monday that monetary policy "will be restrictive for some time" [1], for inflation to return to the 2% target, echoing recent remarks from other Fed voters. Ms Mester had said that "We have to be singularly focused on inflation" [2], while Mr Waller had supported "continued rate increases" [3].
These remarks came before Friday's strong Jobs report, which showed the addition of 263,000 payrolls and a decline of the unemployment rate to 3.5%, supporting the Fed's focus on restoring price stability over the labor market.
This has led to another repricing of market expectations, this time on the hawkish side, with CME's FedWatch Tool projecting a 75 basis points in November with nearly 80% probability at the time of writing. [4]
The greenback attracted fresh flows and EUR/USD started the week on the back foot, also weighed by the escalation in the Russia-Ukraine military conflict. Bears stay in control and have the ability to push for fresh twenty-year lows, towards 0.9483, but may need fresh impetus for such moves.
Despite the downside bias, a new effort to push higher in the short-term would not be surprising, but this would likely need a catalyst and we struggle to see a sustained recovery under current conditions. The EMA200 at the 0.9858-0.9900 region provides the first big hurdle, whereas parity is guarded by the descending trendline from the 2022 highs and the daily Ichimoku Cloud.
Markets now brace for Thursday's US CPI inflation update, which can spur volatility and determine the trajectory of the pair, while Fed minutes are released a day earlier.
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 11 Oct 2022 https://www.federalreserve.gov/newsevents/speech/brainard20221010a.htm | |
| Retrieved 11 Oct 2022 https://www.reuters.com/markets/us/fed-must-be-singularly-focused-inflation-mester-says-2022-10-06/ | |
| Retrieved 11 Oct 2022 https://www.federalreserve.gov/newsevents/speech/waller20221006a.htm | |
| Retrieved 12 Apr 2026 https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html# |
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.