EUR/USD stays in a rangebound structure below 1.0100 ahead of ECB policy/US GDP
- EUR/USD is displaying a lackluster performance below 1.0100 as investors await ECB policy.
- The risk impulse is extremely positive and is favoring the shared currency bulls.
- ECB’s Lagarde may announce a rate hike of 75 bps.
The EUR/USD pair has extended its lackluster performance in the Tokyo session as investors are awaiting the announcement of the interest rate decision by the European Central Bank (ECB). In addition to the ECB policy, the US Gross Domestic Product (GDP) data also carries the utmost importance.
The asset is oscillating in a 1.0075-1.0094 range after a bullish Wednesday. The shared currency bulls remained in the upward trajectory led by optimism in risk impulse. The major displayed a sheer rally after overstepping the psychological hurdle of 1.0000.
Meanwhile, the US dollar index (DXY) has shifted its business below 110.00 as safe-haven's appeal has faded completely. The 10-year US Treasury yields have tested waters below 4% cushion.
Due to the headwinds of soaring inflationary pressures and energy prices, ECB President Christine Lagarde may choose a hawkish stance on interest rates. A note from ING states that a 75 bps hike looks like a done deal but the ECB has a lot on its plate at its October meeting. Quantitative tightening talks are premature but it will seek to mop up bank liquidity.
Apart from the ECB’s monetary policy, expectations of a price cap on energy prices are trending in the Eurozone. Germany’s Economy Minister Robert Habeck said on Tuesday that they “expect the gas price mechanism decision at the next EU Council.” He further added that “Joint EU purchases are the best way to keep the gas price low,”
On the DXY front, the US GDP data is seen higher by 2.4% vs. a decline of 0.6% reported earlier. It would be worth watching the placement of the GDP figures in comparison with the projections as Monday’s PMI numbers reported by S&P were lower than expectations.