The EUR/USD is currently trading near 1.0250 after finding fresh increasing traction. The new strength was in the vicinity of 1.0220 in the early Asian session. The pair is still reaping the benefits from expectations of hawkish ECB moves.
EUR/USD Cheers Dollar Correction
The US Dollar is also still correcting across the board and it serves the pair. The currency pair had a new wave of bids early in Europe. It subsequently rose more than 100 pips to reach a two-week high of 1.0270.
However, bulls could not sustain the higher price as the price dropped under 1.0250.
EUR/USD price chart. Source TradingView
The US Dollar is stretching its corrective drop from a twenty-year high for a fifth day. It, nevertheless, formed a support for the EURUSD pair. The ECB and RBA repricing their tight monetary policy is weighing heavily on the US Dollar.
The reduced anxiety over the expected 100 bps Fed increase in July calmed the market. So did the dissipating fear of recession. Many investors are now predicting that there could be a bottom around the corner.
The excited market mood is equally working with the US Dollar’s slide in comparison with its major competitors.
Reports from Reuters indicate that the ECB policymakers are ready for a 50 bps hike. They will be discussing the possibility and prospects at their meeting. Then such an increase, to control unprecedented inflation, will not be surprising.
Factors Aiding the Pair
The money market is pricing in a 40% possibility of a half-point rate increase this week. Yet, the market is betting on a 97 bps hike by September. The news about the ECB has given the necessary boost to the EUR/USD short-squeeze.
Meanwhile in Russia, the country has commenced gas flow through its Nord Stream1 as scheduled. The pipeline moves over one-third of Russia’s gas export to Europe. It was important the pipeline began operation after shutting down for 10 days on maintenance grounds.
The market was skeptical about Russia’s plans. Russia’s Gazprom cut the gas supply to Europe by 60% last month. The news around Nord Stream1 aided the EUR/USD pair in its recovery process.
Trade negotiations were held between the EU and China on Tuesday. The negotiations yielded results as both sides committed to continue talking. A media outlet in China described the talks as efficient, candid, and pragmatic.
Reuters said there was progress on macroeconomic policies, opening up the supply chain and trade systems. This could positively impact the EUR/USD pair in months to come.