Preparing to Sell EUR/USD With the Next Test Coming Up for Buyers

Yesterday we saw a decent increase in the Euro against the US Dollar, supported by a larger-than-expected decline in US durable goods orders for January, as well as by some hawkish comments from ECB members. Both the headline and core CPI (consumer price index) inflation ticked higher at 8.6% and 5.3% respectively this month, which shows that inflation is not cooling off as fast as most would have wanted.

These figures followed positive official data from Eurostat earlier in the week, revealing that the Eurozone economy had expanded by 0.1% in Q4 2022, surpassing expectations of a 0.1% decline. ECB member Vujicic made some comments yesterday, pushing for a 50 bps rate hike in next month’s meeting, which is an almost certain deal.

He said “the market anticipation of a 50 basis points (bps) increase at the upcoming March meeting by the European Central Bank (ECB) is reasonable. It is not the ECB’s responsibility to determine the terminal rate. Headline inflation is expected to decline, and the ECB will soon reach restrictive territory. Both headline and core inflation must be taken into account. Currently, the market is estimating a 44% probability of a 75 basis points increase at the upcoming ECB meeting.”