EUR/USD Maintains Strong Position Above Psychological Resistance Amid Weakening US Dollar
In the Asian session, the EUR/USD pair remains comfortably above the key psychological resistance level of 1.1000.
The pair has shown significant strength while the US Dollar Index (DXY) has continued its three-day decline.S&P500 futures have recorded modest gains in Tokyo, reflecting positive market sentiment following decent buying of US equities on Monday. Despite the Federal Reserve (Fed) maintaining the possibility of another interest rate hike in July, the USD Index has reached a two-month low at 101.74. According to the CME Fedwatch tool, there is over a 92% chance of a 25 basis point (bp) interest rate hike, which would raise rates to 5.25-5.50%.
The US Dollar Index is under significant pressure as the potential interest rate hike by Fed Chair Jerome Powell in July could exacerbate existing concerns over a tight labor market and consistently softening inflationary pressures.
Looking ahead, market focus will be on Wednesday’s release of the United States Consumer Price Index (CPI) data.
The preliminary report indicates a higher monthly headline CPI rate of 0.3% compared to the previous rate of 0.1%.
Core inflation, which excludes oil and food prices, is expected to align with the headline CPI rate.
In the Eurozone, investors are eagerly awaiting the final reading of German inflation data. Inflationary pressures in the German economy are notably higher than in other European nations, which keeps the likelihood of further policy tightening by the European Central Bank (ECB) strong.ECB Governing Council member Francois Villeroy de Galhau stated over the weekend that Eurozone interest rates will soon reach their peak, but it will be more of a high plateau than a definitive peak.
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