EUR/USD – US Dollar Strength Remains the Prime Driver | SHORT

Federal Reserve chair Jerome Powell is expected to announce the first in a series of 0.25% interest rate hikes at tomorrow’s FOMC meeting. According to market thinking, this will be the first of seven quarter-point hikes this year with four more expected in 2023. These expectations have boosted the value of the US dollar over the last few weeks and traders will be looking, and listening, to chair Powell’s post-decision statement to see if he has turned further hawkish in the face of rampant inflation. US headline inflation touched 7.9% last week, a fresh 40-year high.

EUR/USD is trying to edge higher but the move looks limited and vulnerable to another leg lower. The pair will continue to be driven by the US dollar, while the euro will remain under constant pressure as the ECB wrestles with stagnating growth and rampant inflation. A hawkish outtake from chair Powell tomorrow will test the pair’s resolve and leave 1.0900 vulnerable. Below here the recent 1.0806 print guards a cluster of prior lows on either side of 1.0770.