EUR/USD corrects from multi-month peak, drops to 1.0600 mark ahead of ECB decision – by hareshmenghani EURUSD Fed RiskAversion ECB Currencies
A hawkish assessment of the FOMC decision and the risk-off impulse benefit the safe-haven buck.Thepair comes under heavy selling pressure on Thursday and snaps a two-day winning streak to the 1.0700 neighbourhood, or a six-month high touched the precious day. The pair extends its steady intraday descent through the first half of the European session and drops to a fresh daily low, around the 1.0600 mark in the last hour.
A combination of factors assists the US Dollar to stage a goodish recovery from its lowest level since mid-June, which, in turn, is seen exerting downward pressure on the EUR/USD pair. The US central bank on Wednesday signalled that it will continue to raise rates. Moreover, policymakers see the terminal rate rising to 5.1%, an additional 75 bps increases in borrowing costs by the end of 2023.
Investors, however, expect the US central bank to pivot from an ultra-hawkish stance to something more neutral. This, in turn, keeps the US Treasury bond yields depressed, which might hold back the USD bulls from placing aggressive bets and lend some support to the EUR/USD pair. Traders might also prefer to wait on the sidelines ahead ofdecision, scheduled to be announced later this Thursday.
Furthermore, investors will scrutinize ECB President Christine Lagarde's remarks at the post-meeting press conference, which will influence the shared currency. Apart from this, the US macro data - Retail Sales, the PhillyManufacturing Index, Weekly Initial Jobless Claims data and Industrial Production data - should provide some impetus to the EUR/USD pair.
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