EUR/USD bulls are tiring ahead of ECB and after US CPI – by fx_ross EURUSD ECB CPI Fed Currencies
US CPI was hot and has kept the Fed rate hike thesis alive and kicking.
EUR/USD is flat on the day so far and trading near 1.0742 and staying within a range of 1.0725 and 1.0742. Overnight, banking stocks surged back and and interest rate futures despite the collapse of some US banks over the past few days. Instead, fears of contagion in the U.S. banking system have reduced and the US Dollar has found its footing again.Investors are treading cautiously ahead of next week´s Federal Open Market Committee meeting. The US Consumer rose 0.4% last month after accelerating 0.5% in January. In the 12 months through February, the CPI increased by 6.0%, a slower pace than the 6.
The banking sector concerns due to the collapse of Silicon Valley Bank and Signature Bank have caused turmoil in financial markets. Markets are in anticipation of a terminal rate of 4.45% for December, down from more than 5% last week. Fed funds futures also reveal a change in sentiment with regard to this month's FOMC meeting. However, the CME´s Fed Watch Tool shows a 28.
Looking ahead, the Europen Central Bank will be key. Analysts at TD Securities explained that they expect the central bank to hike rates by 50bps and drop its one-meeting-ahead forward guidance, emphasizing data dependency from here. ´´But during the press conference,´´ they said, ´´Lagarde is likely to keep a 50bps hike on the table for May's meeting. Projections are likely to show weaker headline inflation and stronger core inflation and growth.
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