EURUSD is trading higher today following an overnight rally. However, the pair has been rather muted in the afternoon trade. This is somewhat surprising given that there was some EUR- and USD-related news. However, lack of major reaction from EURUSD can be reasoned with the fact that both EUR- and USD-related news were hawkish.
When it comes to EUR-related news, Wall Street Journal reported that the European Central Bank members agreed to start discussions on quantitative tightening in early-October at a non-decision meeting in Cyprus (October 5, 2022). Decision is expected to be made before year's end and will most likely see the beginning of balance sheet run-off in the first quarter of 2023. While the move will tighten financial conditions a lot will depend on details, especially pace of reduction in the €5 trillion balance sheet. Interestingly, ECB President Lagarde said yesterday that now is not the time for such measures to be implemented.
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Create account Try a demo Download mobile app Download mobile appMoving on to USD-related news, traders were offered speeches from some Fed members today. James Bullard, head of St. Louis Fed, said that he is leaning more strongly towards another 75 basis point rate hike at a meeting later this month. He continued saying that even a lower inflation reading next week (Tuesday, 1:30 pm BST). However, more USD-volatility may come later as 2 Fed members - George and Waller - are set to speak on economic outlook at 5:00 pm BST.
EURUSD pulled back off the daily high earlier today but has been rather muted in the afternoon when Bullard made his speech and WSJ reported on possible ECB QT discussion in October. A brief pullback was halted at the 1.0030 support zone, slightly above the lower limit of a local market geometry (1.0017). Source: xStation5
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