EUR/USD FOREX Fundamental analysis on October 11, 2022
Three times over the last three months investors tried to confront the Fed, and three times the idea of a "dovish reversal" brought traders losses. Now, even softened comments from FOMC members are not inspiring buyers of stock indices and EUR/USD. The bulls' behavior looks like hopeless doom.
The Fed has discouraged the markets. The S&P 500 is making new lows and EUR/USD is unlikely to be supported by the stock index. But, is it that bad for buyers? The hawkish sentiment is getting stronger in the ECB council. According to the head of the Dutch Central Bank, the European regulator should act more decisively in the fight against rising inflation and hold two serious rate hikes at the next meetings. And one of them should be by 75 basis points.
It would seem that why should the ECB tighten economic conditions if Eurozone inflation is more dependent on energy costs? In fact, a recent Central Bank study showed that domestic demand is increasingly influencing inflation growth. So, the ECB's hawkish course makes sense, and it is possible that Christine Lagarde will soon announce a continuation of the rate hike cycle.
At the same time, even the ECB's sharp reversal does not allow it to compare its policy to that of the Fed. Consequently, the EUR/USD downtrend is still stable.
The release of the U.S. inflation report on October 13 may have a short-term impact on the EUR/USD dynamics, as Bloomberg expects the consumer price index to slow down from 8.3% to 8.1% while core inflation accelerates from 6.3% to 6.5%. In August, such divergent indicators led to a collapse in risk taking. History could repeat itself. Ahead of the release of the important report, EUR/USD is likely to consolidate in the 0.9640-0.9740 range. We are partly fixing profits in shorts.
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