- The shared coin extends its gains on the week by 0.42%.
- The US dollar falls thanks to an upbeat market mood.
- The ECB’s Rehn backs a move above 25 basis points at the ECB meeting in September.
- The Fed’s Barkin supports a 50/75 basis point rate hike in July and says inflation will come down when supply chain issues are resolved.
The EUR/USD rises for the second day in a row, although it struggles to approach 1.0600, as sellers dragged the pair from daily highs around 1.0582 towards the 1.0530 area during the American session. At the time of writing, EUR/USD is trading at 1.0529, posting a nice 0.18% gain.
Risk appetite boost weighs on USD, euro rises
Sentiment is positive as global equities are rising. As risk appetite increases, haven assets such as the dollar remain on the defensive. Meanwhile, on Monday, ECB President Lagarde said the central bank will raise interest rates in July and remained flexible on the size of the rate hike in September.
Although Lagarde’s comments lifted EUR/USD close to the 1.0600 figure, buyers did not have the strength to push the major currency above it, and it fell. The interest rate differential between the ECB and the Fed is likely to favor the greenback, which is almost sideways, as the US dollar index shows.
In addition to Lagarde’s comment, ECB Chief Economist Philip Lane said he sees no need to review the plan after July’s rate hike decision, adding that there is no forecast beyond September on what the proper rate of hardening.
On Tuesday, the ECB’s Rehn, one of the central bank’s hawks, said inflation in the EU has widened and remains stronger, adding that he supports a rate hike of more than 25 basis points in September.
Several Fed members gave statements. Richmond Fed President Thomas Barkin said the Fed would have to tighten monetary policy, but the question is how much. He stressed that the Fed must be flexible and commented that after the UoM survey, he believed that reaching 75 basis points was possible.
Barkin added that 50-75 bps in July is reasonable and said inflation will come down as supply chain issues are resolved.
Meanwhile, on the US economic docket was the Chicago Fed National Activity Index, which fell to an eight-month low of 0.01 in May from 0.40 in April. Later, US existing home sales decreased 3.4% to 5.41 million in May 2022, the lowest level since June 2020.
Key technical levels
Source: Fx Street
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