EUR/USD sharply climbs on weaker US dollar

The EUR/USD pair bounces from two-decade lows recorded during the European session, gaining 1.34% in the day, boosted by improved in market sentiment and a weaker US dollar, despite the Fed’s hawkish stance, opening the door for aggressive tightening by the end of the year.

The Euro began trading nearby the day’s lows, just below the 0.9600 figure, and dived towards a fresh two-decade low at around 0.9538 before rallying sharply towards the daily high at 0.9726 before settling around current spot prices. At the time of writing, the EUR/USD is trading at 0.9722.

The energy crisis keeps the Eurozone under pressure. In the previous trading session, namely on Tuesday, news that the Nord Stream pipelines 1 and 2 had leaks pushed energy prices higher. Some countries’ officials said it could be sabotage, and even Danish PM Frederiksen said it was “hard to imagine that these are coincidences.”

German officials expressed concern that a “targeted attack” had caused a sudden pressure loss. Norway was looking to increase security around its infrastructure. Earlier, the EU’s economic calendar featured the GfK Consumer confidence, which fell to -42.5 heading into October, from a -36.8 September reading, below estimates. According to the GfK institute, improvement in consumer morale is closely tied to lowering inflation.

ECB officials have expressed the need for another 75 bps rate hike at its October meeting, led by ECB member Kazimir, Rehn, and uber-hawk Austria’s central bank governor Robert Holzmann.