EUR/USD Stalls as US Dollar Strength and ECB Concerns Prevail

Posted On: September 25 2023

EUR/USD Stalls as US Dollar Strength and ECB Concerns Prevail

The EUR/USD pair faced difficulty gaining momentum as the new week began, hovering around the mid-1.0600s in the early European session. This stagnant movement follows the pair's recent decline, reaching its lowest point since March last Friday. The strength of the US Dollar (USD) plays a significant role in this scenario, boosted by the Federal Reserve's hawkish stance. The Fed's commitment to keeping interest rates elevated, coupled with concerns about persistent US inflation and reduced rate cut expectations for 2024, has led to higher US Treasury bond yields.

Additionally, the safe-haven appeal of the USD is bolstered by worries about a property market crisis in China. Conversely, the euro is weighed down by the European Central Bank's (ECB) recent dovish rate decision, which included downgraded CPI and GDP growth forecasts for 2024 and 2025. This suggests a possible peak in the ECB's tightening cycle and adds to the bearish sentiment surrounding the EUR/USD pair.

Traders are now monitoring the German Ifo Business Climate and ECB President Christine Lagarde's upcoming speech for potential market direction. While there are no major US economic releases today, USD remains influenced by US bond yields and broader risk sentiment, which could impact short-term opportunities in the EUR/USD pair.

EUR/USD continues at its solid support level fighting for direction. The pair seems more oriented to continue its bearish trend and break toward the next 1.0550 support and historical level.