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Jun 15 - 11:55 AM

EUR/USD - COMMENT-EUR/USD Fizzles After ECB Surprise But Downside Is No Sure Thing

By Christopher Romano  —  Jun 15 - 10:30 AM

EUR/USD held slightly higher on Wednesday but faded from the day's high of 1.0508 on EBS as optimism that an unscheduled ECB meeting would tackle fragmentation risk faded following the details of the gathering, nF9N2WY00B but shorts were also left with uncertainty over the Fed.

May U.S. retail sales came in below estimates and April's data was revised lower nL1N2Y1219.
June New York Fed manufacturing was expected to rise after dropping sharply in May but posted a downside surprise nN9N2WB00L, leaving concerns about slowing U.S. growth.

Investors are leaning toward a 75 bps hike from the Fed FEDWATCH and another 75 bps hike in July, though they have tempered their terminal Fed rate expectations.
March 2023 Eurodollar EDH3 prices rallied sharply and gains in the June 2023 contract EDM3 suggest expectations of cuts are being pulled forward.

The downbeat data and potential for Fed rate cuts in 2023 may temper dollar bulls.
EUR/USD may fail to break key 1.0335/50 support unless the Fed strikes a much more hawkish tone and U.S. data starts showing solid growth.

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Source:
Refinitiv IFR Research/Market Commentary

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