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Feb 29 - 01:55 PM

EUR/USD - COMMENT-Limit To Hawkish ECB Repricing Keeps EUR/USD Capped

By Justin Mcqueen  —  Feb 29 - 12:15 PM

Thursday’s in-line core PCE data changed very little for the Federal Reserve’s rate outlook, which in turn has kept EUR/USD within a tightly controlled range, while difficulty in maintaining upward advances may remain.

Markets continue to price in three 25bps rate cuts this year, most likely kicking off at the June meeting 0#FEDWATCH.

Meanwhile, regional euro area inflation figures – French, Spanish and German – continued to show progress on the disinflation front despite broadly coming in hotter than expected.

Although, with European Central Bank hawks now believing that current rate expectations are fairly priced, a further hawkish repricing looks limited 0#ECBWATCH..
As such, challenges to euro upside are likely to persist, particularly in the lead up to next week’s ECB policy decision.

As previously mentioned, Friday’s euro area inflation data will likely set the tone for the upcoming ECB meeting.
Therefore, given expectations are for both headline and core inflation to undershoot the bank’s Q1 projections, risks tilt towards euro downside.

For EUR/USD, initial support is seen at 1.0790-1.0800, a break of which opens the door to a re-test of the February lows (1.0695-1.0700).

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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