- ECB policymakers support the need for more interest rate increases.
- January’s retail sales in the Eurozone fell by 2.3% year over year.
- Traders are pricing a nearly one-in-three possibility of a half-point Fed rate hike this month.
Today’s EUR/USD price analysis is bullish. Officials from the European Central Bank supported the need for more interest rate increases.
Despite evidence of lessening price pressures, Chief Economist Philip Lane expects more rate increases from the ECB in the coming months. At the same time, Chief Economist Robert Holzmann of the Austrian central bank believes the bank will need to raise rates by 50 basis points at its next four meetings.
The European Central Bank has increased interest rates by three percentage points since July and signaled a 50 basis point hike for March. It has left room for additional moves, which it stated would be decided “meeting by meeting” and be “data dependent.”
Citigroup anticipates that the European Central Bank will increase rates by 50 basis points each in March and May, bringing its policy rates to roughly 4% by July.
According to economists led by Arnaud Marès, this line of action by the ECB will probably lead to overtightening of rates to control record-high inflation.
On the data front, January’s retail sales in the Eurozone increased by 0.3% m/m. Still, they fell by 2.3% year over year, highlighting the weakness of consumer demand and the broader economic slump.
Tuesday’s main event is Powell’s first two appearances before Congress this week. The expected terminal rate is now stable at roughly 5.50%, and traders are pricing in a nearly one-in-three possibility of a half-point rate hike this month. This means that traders expect him to give lawmakers a hawkish testimony.
EUR/USD key events today
Investors will pay attention to Fed Chair Powell’s testimony to Congress. His speech might contain clues on future policy moves.
EUR/USD technical price analysis: Bulls set to continue the uptrend
The 4-hour chart shows EUR/USD in a bullish move as it trades above the 30-SMA with the RSI above 50. The price has broken above the 1.0675 resistance and made a new high, another sign that bulls are stronger.
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The price has retested the recently broken resistance, and bears have not shown much strength, which might allow bulls to continue the uptrend after the pullback. The next target for bulls is at 1.0725 resistance.
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Saqib Iqbal
