EUR/USD Drops, Markets Monitor Fed's Hawkish Signals
The EUR/USD weakened in recent trading, hovering in the 1.1630–1.1640 range. Pressure on the euro emerged as the strengthening US dollar re-dominated the foreign exchange market. Investors considered the dollar more attractive because the outlook for US monetary policy appeared tighter than that of the European region.
The strengthening US dollar was triggered by rising inflation concerns in the United States, particularly as energy prices remained a global market concern. This situation has led market participants to expect the Fed to be in no hurry to cut interest rates. In fact, some market participants are starting to consider the possibility of a more hawkish policy if inflation becomes difficult to control again.
On the other hand, the euro remains under pressure because the economic outlook for the European region is not yet fully robust. As the divergence in policy direction between the Fed and the European Central Bank becomes more apparent, EUR/USD tends to be under pressure. A stronger dollar also encourages investors to reduce exposure to riskier currencies and choose assets perceived as safer.
Technically, EUR/USD remains under pressure as long as it moves below the 1.1650 area. If selling pressure persists, the 1.1600 level becomes important support to watch. However, if the euro is able to break through the 1.1650–1.1675 area, the opportunity for a technical rebound could open up in the short term.
Reasons for EUR/USD Weakening
The EUR/USD weakened due to a strengthening US dollar, high Fed interest rate expectations, and the market still monitoring US inflation pressures. Furthermore, the less-than-stellar European economic outlook makes it difficult for the euro to gain a strong boost. (CP)
Source: Newsmaker.id
