- EUR/USD falls before the end of the week, the month and the third quarter.
- US Fed officials continued their “tight policy” rhetoric, agreeing that further hikes are on the way.
- The US core CPI beat analysts’ expectations, paving the way for another 75 basis point hike from the Fed.
- EU inflation topped the 10% threshold, with money market futures expecting another 0.75% rise.
The EUR/USD pulls back from daily highs around 0.9853 as Fed officials express need for longer rate hikes as US central bank battles elevated inflationary pressures above 6% threshold %, as the Fed’s preferred inflation gauge shows on Friday. At the time of this writing, the EUR/USD pair is trading at 0.9788, down 0.29% from its opening price.
A group of Fed policymakers made statements, led by Vice Chair Lael Brainard, saying the Fed needs to keep interest rates higher for longer if the Fed is to hit its target. She added that the Fed would not withdraw prematurely, while echoing other colleagues’ expression of not knowing where rates would peak. Later, in the same vein, San Francisco’s Mary Daly commented that further hikes are ahead and the Fed is “determined” to tame inflation.
Richmond Fed President Thomas Barkin said he is “comfortable” with the pace of rates, adding that it is not known how much the Fed will have to do to reduce demand and hit its inflation target.
Apart from this, the US Department of Commerce revealed that the US Federal Reserve’s favorite measure of inflation, known as PCE, increased more than estimated in August, at a pace of 0.3% MoM, 6.2% YoY, while Core PCE, which excludes volatile items, accelerated to 0.6% MoM, up 49% YoY.
Late in the day, the final reading for consumer confidence from the University of Michigan came in at 58.6, lower than previously reported. In the same report, one-year inflation expectations rose to 4.7% from 4.6%, while five-year inflation expectations slowed to 2.7% from 2.8% previously.
The US economic data revealed in the week, despite not being outstanding, showed resilience. With the rhetoric from Fed policymakers, the US central bank could be headed for a fourth consecutive rate hike of 75 basis points in November.
On the other hand, the EU reported inflation data that exceeds the 10% threshold, which is a headwind for the bloc’s economy. Analysts expect another large rise by the ECB, which, together with factors such as the escalation of the conflict between Russia and Ukraine, with the signing by Vladimir Putin of a decree for the annexation of four Ukrainian regions, will put extra pressure on the euro. .
EUR/USD Key Technical Levels
Source: Fx Street
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