EUR/USD Analysis: Gains Amid ECB Hawkishness and Fed Dovish Outlook
In the early hours of Asian trading on Friday, the EUR/USD pair witnessed modest gains after retreating from its monthly peak of 1.1139. The pair, trading around 1.1070, reflects a slight increase of 0.04% for the day. This movement in the major currency pair is primarily influenced by the contrasting stances of the European Central Bank (ECB) and the Federal Reserve (Fed).
ECB’s Hawkish Stance Supports Euro
The Euro (EUR) finds some backing from the ECB’s hawkish position, which has resisted market expectations for policy easing. The ECB policymakers emphasized that their decisions are data-driven and independent of market pricing or external pressures. This firm stance has provided a boost to the EUR, contributing to the modest gains observed in the EUR/USD pair.
Federal Reserve’s Dovish Remarks
Conversely, the Fed’s dovish comments have set a different tone. Market participants are now anticipating the US central bank to initiate interest rate cuts as early as next year. The CME FedWatch Tool indicates that the probability of a rate cut in the March meeting exceeds 87%, reflecting a significant shift in market expectations.
US Economic Data and Market Reaction
Recent US economic data presented a mixed picture. Initial Jobless Claims for the week ending December 23 reported an increase to 218,000, exceeding both the prior week’s figure and market forecasts. Additionally, US Pending Home Sales for November remained unchanged, falling short of the expected 1.0% increase. These figures contribute to the market’s perception of the economic landscape and influence currency movements.
Quiet Market Anticipated on Year’s Final Trading Day
As 2023 draws to a close, market activity is expected to be subdued on the final trading day. Investors will be eyeing Spain’s preliminary December Consumer Price Index (CPI) and the US Chicago Purchasing Managers’ Index (PMI) for December, seeking cues for future market directions.
EUR/USD Technical Analysis
From a technical perspective, the EUR/USD pair has successfully tested the crucial support level at 1.1080, maintaining stability above it. This trend suggests that the bullish momentum is still in play, with the pair eyeing targets at 1.1145 and potentially extending to 1.1200.
The currency pair’s movement above this support level is key to sustaining the bullish trend. Traders and analysts will closely monitor these levels and economic indicators to gauge the pair’s trajectory in the context of the broader economic and monetary policy landscape.
EUR/USD Live Chart
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