EUR/USD aims to regain the magic number of 1.0000 as attention turns to ECB policy

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  • EUR/USD is heading towards parity of 1.0000 on the surge of ECB hawkish bets.
  • Russia has cut energy supplies to the Eurozone citing Western sanctions.
  • The DXY turned volatile amid weaker estimates of the US services ISM PMI.

EUR/USD is showing a minor correction after recording an intraday high of 0.9970 during the Asian session. The corrective move does not look like signs of a bearish reversal but a healthy decline, which market participants for adding longs will capitalize on. On Monday, the asset posted a firmer bounce after breaking the crucial support at 0.9900. As investors viewed the pair as a value bet, shared currency bulls strengthened and rallied strongly.

Eurozone bulls are picking offers as the odds of a hawkish stance by the European Central Bank (ECB) on interest rates rise. As price pressures soar across the trading bloc, ECB President Christine Lagarde could announce a 50 basis point (bp) rate hike. The Eurozone Harmonized Index of Consumer Prices (HICP), the ECB’s most preferred inflation gauge, landed at 9.1%, which is badly needed to be contained sooner.

Meanwhile, the energy crisis is deepening in the euro zone as Russia cut off energy supplies via the Nord Stream 1 gas pipeline due to Western sanctions. Western leaders imposed a price cap on Russian oil and in response, the Kremlin cut gas supplies ahead of the winter season, known for its higher energy demand.

On the dollar front, the US Dollar Index (DXY) attempted a rally after remaining volatile in the opening session. The DXY picked offers around 109.40, however, the decline remains favored amid weaker estimates for the US ISM services PMI data. The economic data is seen at 55.5, lower than the previous release of 56.7.

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