The EUR-USD pair is getting close to hitting a new two-week high as the U.S. Fed and ECB ping pong around with inflation solutions and ideas. Over at the Federal Reserve, we’ve got a bit of a circus act. Across the pond, the European Central Bank is putting on its own show.
Fed’s Mixed Outlook
Neel Kashkari, the eternal dove, is in no hurry to cut interest rates. He’s playing it cool, suggesting the Fed is keeping its options open as it evaluates wage growth against its 2% inflation target. Meanwhile, Bowman threw some shade on the Fed’s decision-making, hinting that an earlier tapering of QE back in 2021 might have spared us some chaos now.
The recent surge in U.S. consumer confidence, hitting 102.0 versus the expected 95.9, has given the dollar a bit of swagger. Pair that with the steady March Case-Shiller home price index at 0.3%, and it’s no surprise the USD flexed its muscles for a hot minute.
ECB’s Interest Rate Reduction Process Might Begin
ECB’s Centeno is dropping hints that the interest rate reduction process is about to kick off. His optimism is echoed by ECB’s Holzman, who’s all in for a rate cut next week, though he cautions that future moves aren’t set in stone.
Knot, another ECB voice, notes that the risk of a hard landing in the Eurozone is fading faster than expected, which could influence the timing and scale of rate cuts. Knot also mentioned that the upcoming projection round meetings will be crucial in determining the next steps for interest rate decisions. Essentially, the ECB is trying to find a sweet spot: easing rates to stimulate growth while avoiding the pitfalls of overly aggressive monetary loosening.
Technical Analysis Insights
From a technical analysis perspective, the EUR-USD pair is teasing a breakout. An inverse head-and-shoulder pattern is forming, with the neckline at 1.0884. Close to that level is the 61.8% Fibonacci retracement at 1.0877. The EUR-USD was up nearly 31 pips today, but since the NY session opened, it has given up most of those gains and is currently sitting at 1.0871—a 13-pip gain for the day so far.
