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EUR/USD: demand will surge amid a pause in Fed rate hike cycle
June 15, 2023 3:22 amVideo
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The US inflation data released yesterday practically confirms the inevitable pause in the Fed’s rate hike cycle. Reportedly, the overall consumer price index increased in May, but the year-on-year figure grew at the slowest pace since March 2021.
However, the inflation rate, standing at 4.0% y/y, still exceeds the 2% target level, so a 0.25% rate increase could occur next month. This supports the yield of US Treasury bonds, which, consequently, supports dollar.
Recent hawkish statements from ECB members suggest that despite the drop in the eurozone’s core consumer price index to 6.1% in May, there could be an increase in the ECB’s borrowing costs. In fact, just last week, ECB President Christine Lagarde stated the possibility of a further rate hike, as no signals indicate the peak of underlying inflation. This may support euro, leading to a rise in EUR/USD.
Thus, for long-term trading, traders may want to wait on the sidelines before the key events – the FOMC decision today and the ECB meeting on Thursday. However, for those who enjoy taking risks, there may be an upward movement in euro, since the Fed could announce a pause in raising interest rates.
The material has been provided by InstaForex Company – www.instaforex.com
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