EUR/USD's struggles to make headway ahead of Fed's Powell – by fx_ross EURUSD Currencies Fed DollarIndex Equities
prices pared back gains on OPEC+ output concerns, overall weighing on riskier currencies as the US Dollar rebounds.
The euro was initially buoyed earlier on Tuesday due to the hopes of a potential easing in China's strict pandemic restrictions following an unprecedented episode of unrest in the country. Consequently, DXY fell 0.4% to 106.19. Nevertheless, twosauntered through the door on Tuesday, missing expectations, and potentially weighing on risk sentiment.
The Conference Board's index shaved off 2 points to come in at 100.2, a hair above the 100 consensus. Additionally, the S&P DJI Case-Shiller home price data showed monthly declines across the board in its 20-city composite. Year-over-year, the composite added 10.4%, vs. August's 13.1% reading. Eyes will now be on the November employment report in Nonfarm Payrolls which is expected on Friday.
However, St Louis Fed CEO James Bullard said the Fed has “a ways to go to get to” restrictive policy, adding that the first 250 bp of tightening was just enough to get to neutral. He added that the Fed needs to move further into a restrictive territory and may need to keep rates higher through 2023 and 2024. Additionally, Bullard stressed that markets are underpricing the risks that the Fed may be more aggressive.
''Bullard and the hawks have been right the whole time,'' analysts at Brown Brothers Harriman said. ''We think the less hawkish ones at the Fed are pushing back a bit now but will likely be forced to capitulate once again if inflation remains sticky, as we expect.''
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