In the last month, the EURUSD has been trending higher and has traded in the range of 0.97-1.01. Markets are interpreting any “softer” data in favor of a Fed pivot, sending EURUSD higher. However, a high US Consumer Price Index (CPI) reading tomorrow could push the pair lower, economists at Nordea report.
Dollar volatility will continue
“It is true that the latest turn to the upside in the EURUSD contrasts with our view of a stronger dollar in the future, but we believe that the recent price action is a reflection of tactical positioning rather than a change in fundamentals.”
“The Fed has clearly said that a pause in its rate hikes is off the table as long as inflation is high. Fighting inflation means higher rates and more pain for risk assets and the real economy. Stock market investors are refusing the memo and are interpreting any “softer” data in favor of a Fed pivot, leading to risk appetite and a weaker dollar. change and investors will feel the pain again and remember the old adage: “don’t fight the Fed”.
“Tomorrow’s CPI inflation report is the next key short-term data. Higher-than-expected inflation figures have been the trigger for a stronger dollar (6 of the last 10 CPI releases this year) and That could easily be the case this week as well, especially when the data shows that financial players are net short of dollars.”
“Looking ahead, EURUSD is likely to continue to have a bumpy run, but we continue to maintain our view of a lower EURUSD towards the end of this year (around 0.95).”
Source: Fx Street
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