EUR/USD swings between 1.1400 as ECB-Fed fight intensifies after US inflation
EUR/USD is balanced around the highest level since mid-November early Thursday morning in Europe. Major currency pairs made the biggest jump in 5 weeks the previous day as the US dollar fell to multi-day lows as inflation data matched expectations, causing market challenges causing the US dollar to drop to multi-day lows. There will be less ammo when they meet on Jan. 25. That suggests, the US Consumer Price Index (CPI) hit its highest level since 1982 while still hitting a forecast of 7.0% year-over-year, down from 6.8% in previous readings. The monthly figures stood at 0.5% vs 0.4% expected but fell below 0.8% previously.
However, Fed policymakers have reiterated their bullish bias following the release of inflation data, thus stressing EUR/USD bulls in recent times. . The Chairman of the Federal Reserve St. Louis James Bullard was the first to declare, according to the Wall Street Journal (WSJ), “four rate hikes in 2022 appear to be on the cards and, in the face of high inflation, and one in March seems very likely.
Then a member of the Fed’s Board of Governors and the new FOMC vice president, Lael Brainard, also mentioned: signaled a rate hike as early as March. On the other hand, European Central Bank (ECB) decision maker François Villeroy de Galhau states: “We are very close to the peak of inflation. It should be noted that industrial production in the euro area increased 2.3% month-on-month in November from previously revised 0.5% and 1.3% forecasts.
With the recent escalation of pressure on Fed policymakers, bond yields consolidate previous losses, raising questions about equity futures and assets more risky. However, a large number of policymakers from the European Central Bank (ECB) and the Fed will speak on Thursday, thus providing an active day for EUR/USD traders. In addition to monetary policy signals, the US Producer Price Index (PPI) for December and weekly jobless claims, along with the European Economic Bulletin, will also lead the pair’s moves Short-term.
In summary, recent inflation data reinforces the drama between the ECB and the Fed even as the Fed has the upper hand over the bloc’s central bank. Therefore, the EUR/USD price could turn lower if the balance is in favor of the Fed hawks.