- Risk appetite returns and supports the euro.
- EUR/USD bulls head towards 1.09.
The pair EUR/USD hit a five-day high at 1.0846 as euro zone government bond yields rose on Tuesday and after a US regulator-backed deal for First Citizens BancShares to buy Silicon Valley Bank helped ease concerns in the banking sector. At time of writing, the EUR/USD pair was trading at 1.0841, up 0.4% from the daily low of 1.0795.
The dollar fell for the second day in a row against a basket of currencies on Tuesday, and the DXY, which measures the currency against six rivals, hit a low of 102.41, not far from the seven-week low of 101.91 hit last Thursday. .
Last week, the Federal Reserve’s Federal Open Market Committee raised interest rates by 25 basis points, as expected, but took a cautious stance due to the ongoing banking crisis. However, Fed Chairman Jerome Powell kept the door open for further rate hikes if necessary, stemming the dollar’s slide.
“We believe that the markets are overestimating the Fed’s ability to ease and, therefore, the dollar should end up recovering when expectations are revalued,” argue analysts at Brown Brothers Harriman.
”Fed officials continue to view the banking crisis as a regulatory failure. If this turns out to be the case, it is likely that the impact on monetary policy will not end up being too significant,” the analysts added.
The next FOMC meeting will be on May 2-3, and the WIRP points to a 55% chance of a 25 basis point hike. From there, everything will revolve around the cuts. Nearly two cuts are expected between now and the end of the year, up from 4-5 at the height of the banking crisis earlier this month, but even two cuts look highly unlikely. In this regard, Powell stated after the March 22 decision that Fed officials “just don’t see” any rate cuts this year.”
EUR/USD Technical Analysis
Meanwhile, the EUR/USD pair has broken above the resistance of the falling wedge and is set to test the previous highs at the 1.09 zone. However, a break of the micro trend line support will open up the risk of a significant downside as illustrated above.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
