EUR/USD Rises to Highest Level in Over a Month as Eurozone Inflation Hopes Counter Recession Concerns

In a twist of fate, the EUR/USD pair has soared to its highest level since May 11, reaching 1.0997 on Thursday.

Arslan Butt•Thursday, June 22, 2023•2 min read

In a twist of fate, the EUR/USD pair has soared to its highest level since May 11, reaching 1.0997 on Thursday. This exciting development comes after a three-day slump, with the pair pulling off its biggest jump in a week. It seems like the Euro has been practicing its dance moves, impressing the market with a perceived hawkish stance from the European Central Bank (ECB) and a nonchalant response to Federal Reserve (Fed) Chairman Jerome Powell’s bi-annual testimony.

The Euro bulls are feeling confident, cheered on by statements from Bundesbank Chief Joachim Nagel, ECB policymaker Francois Villeroy de Galhau, and ECB board member Isabel Schnabel. These optimistic voices hint at the possibility of more rate hikes by the ECB, driven by concerns about inflation. However, not everyone is ready to join the dance party. ECB policymaker Peter Kazimir expressed some uncertainty about the rate hike cycle scheduled for September, leaving the door open for surprises.

While the Euro shines on the dance floor, it faces some hurdles. The German IFO Institute warns of a sharper-than-expected German recession, dampening the mood a bit. The economy is taking its sweet time to recover from the slump. On the other hand, Powell’s moves failed to impress the US Dollar bulls, causing the US Dollar Index (DXY) to trip and experience its biggest tumble in a week.

Adding to the dance-off drama, Federal Reserve Bank of Chicago President Austan Goolsbee stole the spotlight with comments about the need for further assessment before any more rate hikes. These words made the US Treasury yields stumble, leaving the US Dollar feeling a bit weak. As if that weren’t enough, fears of a global economic slowdown and escalating US-China tensions created some rhythm disruptions for the EUR/USD pair.

Despite the twists and turns, Wall Street seemed to have two left feet, closing negatively for the third day in a row.

However, the US Treasury bond yields managed to stay in sync after a volatile performance. Now all eyes are on Eurozone Consumer Confidence data, US economic indicators, and central bank announcements from the UK, Indonesia, Switzerland, and Mexico. We can’t forget about the encore performance of Fed Chair Powell as he takes the stage for the second round of testimony before the Senate Banking Committee.

From a technical standpoint, the EUR/USD pair has broken through the 1.0940 level and is strutting toward the 1.1000 barrier. This supports the expected bullish trend in the short term, giving the Euro dancers a reason to celebrate. The inverted head and shoulders pattern adds a touch of elegance, while the EMA50 provides a solid foundation for their moves. However, they must maintain their steps above the 1.0940 level to keep the dance going, with their sights set on the next main target at 1.1075.

It’s an exciting dance floor out there, and the EUR/USD pair is stealing the show with its impressive performance. Let’s see how this dance evolves and if the Euro can maintain its rhythm against the Dollar!

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.