Sellers maintain control around the parity level
- EUR/USD looks offered and bounces off lows near 0.9970.
- The ECB’s subsequent rate decision will depend on the data.
- Another revision saw the US GDP growth rate in the third quarter at 2.6%.
EUR/USD Now coming under further downside pressure and posting new daily lows around 0.9970 on Thursday, where a tentative controversy seems to have emerged.
EUR/USD weaker after ECB rate hike
EUR/USD accelerates the daily decline from highs near 1.0100 and revisits the 0.9970 region as President C. Lagarde’s press conference is underway.
Indeed, President Lagarde highlighted the progress made by the central bank in withdrawing accommodations. The Council sees economic activity in the region slowing significantly in the third quarter, with the crisis around gas prices amplifying headwinds.
Lagarde noted that the ongoing tight monetary policy is translating into weaker global growth, which could lead to higher unemployment in the future.
Regarding inflation, Lagarde reiterated that high energy prices remain almost exclusively the source of ongoing high inflation, while the depreciation of the euro has also added to current inflationary pressures. Currently, inflation risks are on the upside compared to the downside risks seen around the economic outlook.
Lagarde also reiterated that the decision on interest rates will remain data dependent and will be taken on a meeting-by-meeting basis.
Also, Lagarde said that the anti-fragmentation tool, TPI, was not discussed at today’s meeting.
In addition to the ECB event, the US data releases were also noteworthy: following another revision to the GDP growth rate, the US economy is now expected to have grown by 2.6% year-on-year over the During the July-September period, durable goods orders rose 0.4% per month in September and initial jobless claims rose by 217,000 in the week to October 22.
What to look for around the EUR
EUR/USD’s bullish momentum encounters a first hurdle around 1.0100 and triggered a deep reflex which was then exacerbated following the ECB’s decision to raise the key rate by 75 basis points, as widely expected .
In the meantime, the price action around the European currency should closely monitor the dynamics of the dollar, geopolitical concerns and the divergence between the Fed and the ECB. However, the resurgence of speculation around a potential Fed pivot seems to have taken some of the vigor out of the Fed.
In addition, growing speculation of a possible recession in the region – which seems supported by declining sentiment indicators as well as an incipient softening in some fundamentals – adds to the fragility of sentiment around the euro in the longer term. .
Main events in the euro zone this week: Germany GfK Consumer Confidence, Italy Consumer Confidence, ECB Interest Rate Decision, BCE Lagarde (Thursday) – France/Italy/Germany Flash Inflation Rate, Germany Preliminary Q3 GDP Growth Rate, EMU Final Consumer Confidence, Economic Sentiment
Significant problems on the rear boiler: Continuation of the cycle of ECB increases against increased risks of recession. Impact of the war in Ukraine and the continuing energy crisis on the region’s growth and inflation prospects.
EUR/USD levels to watch
So far, the pair is down 0.84% to 0.9997 and the breakout of 0.9972 (October 21st weekly low) would target 0.9704 (October 21st weekly low) en route to 0.9631 (monthly low from October 13). On the upside, there is a first hurdle at 1.0093 (27th October monthly high) followed by 1.0197 (12th September monthly high) and finally 1.0368 (10th August monthly high).