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Powell’s Testimony is being awaited and eyed amid market talk over the longevity of Fed’s 75 bps rate hike. The EUR/USD pair holds onto the previous two-day gains around 1.0535-40 during Wednesday’s initial Asian session.
The pair’s latest rebound could be linked to the softer US dollar, as well as hawkish comments by the ECB policymaker. However, cautious sentiment ahead of Fed Chair Jerome Powell’s Testimony, before the Congress, restricts immediate price moves.
ECB’s Olli Rehn said on Tuesday, “it is very likely that September rate hike is bigger than 25 bps”. Rehn’s comments raised doubts about the ECB’s latest verdict suggesting a 0.25% rate hike in July and September, which in turn propels the EUR/USD prices.
Fed’s Barkin said on Tuesday that there will be no rapid return for the U.S. economy to the experience of the previous decade of stable growth, jobs and inflation. The policymaker also favored higher rates. US President Joe Biden’s firm rejection of the recession fears seems to gain the market’s acceptance and underpin the firmer sentiment amid a lack of major negatives as the US traders began the trading week.
After Biden’s remarks, his Economic Aide Heather Boushey also conveyed hopes of avoiding the recession. It is noteworthy that Biden’s readiness for the gas tax holiday and softer US data also underpinned the positive mood. US Treasury Secretary Janet Yellen said that the traditional recession measure of two consecutive quarters of negative growth ‘has typically worked’ but recessions aren’t all alike.
Talking about the data, US Existing Home Sales dropped to the lowest levels in two years when talking the annualized number. Further, the Chicago Fed National Activity Index also dropped to 0.01 in May versus a revised down 0.04 prior.
Against this backdrop, the US Dollar Index (DXY) dropped for the second consecutive day, to 104.40 by the press time whereas Wall Street pared the biggest weekly loss in two years. Further, the US 10-year Treasury yields also rose to 3.27% at the latest.
Looking forward, various ECB policymakers are up for speeches and may entertain EUR/USD traders. However, Powell’s art of defending the tighter monetary policies and the rate hikes will be crucial for the pair traders to watch for clear directions.
Technically; the first daily closing above the 10-DMA, around 1.0500, in nearly three weeks enables EUR/USD bulls to aim for early June’s swing low near 1.0630.
