The euro is almost unchanged in Thursday’s session. In North American trade, EUR / USD is trading at 1.2166, up 0.05% on the day. After falling sharply on Friday, the pair was left without direction.
All eyes on the FOMC
What can we expect from Wednesday’s FOMC meeting? The Fed has been very consistent in its message to markets that it will continue its ultra-accommodative policy, but investors will want to hear it again, as US inflation has been above consensus for two consecutive months. Fed policymakers may think the time is right to gradually introduce a debate about when to start a quantitative easing slowdown, or they might choose to bring up the topic at another time, perhaps at the forum. Jackson Hole economy in August. If the Fed provides any hints of a policy tightening, we can expect the US dollar to react with gains after the policy meeting.
ECB Says Rise In Inflation Temporary
The ECB made it clear at its meeting last week that it would maintain its ultra-accommodative monetary policy. The central bank acknowledged that the eurozone economy was improving, revising its growth and GDP forecasts upwards. At the same time, the bank pledged to maintain its bond purchase program.
Inflation has become a hot word for the markets, and there was no surprise when the ECB revised its inflation forecast at the policy meeting. The bank is forecasting an inflation rate of 1.9%, significantly higher than the forecast of 1.5% in March. Taking a page from the Fed’s playbook, ECB President Lagarde attributed the projection of higher inflation to temporary factors. Lagarde went even further, saying inflation remains well below the ECB’s target. This means the bank has no plans to tighten policy due to fears of higher inflation. Lagarde’s message stifled any possibility of the euro gaining ground amid investor concerns about inflation.
EUR / USD Technical
- On the upside, 1.2245 has remained in resistance since June 1. Above there is resistance at 1.2325
- There is support at 1.2095 followed by 1.2025