The EUR/USD officially reached parity for the first time after 20 years. The price slightly retracted upwards shortly after. Since then, the pair has been trading sideways.
The sideways movement has likely been triggered by the previous large bearish price action and by traders waiting for the latest CPI figures. The US Dollar Index is again higher this morning and is currently hovering at the 108.10 mark.
Investors’ attention is almost solely on the Consumer Price Index, which is scheduled to be released this afternoon. The CPIis predicted to be 1.1%, 0.1% higher than the previous month. Inflation in the US is 8.6% which is the highest in 40 years.
Over the past 24 hours, the US has not released any major economic figures, but traders have followed the Federal Reserve's statements. Yesterday afternoon, Ms. George advised that the central bank has no other option than to act to contain inflation and bring it down to its 2% target.
However, she also advised that she does not necessarily believe the bank should increase interest rates by 75 basis points as this may adversely affect the economy. However, Ms. George is one of the few Fed bankers who believe that a 75 basis point hike is too far.
Yesterday, the Eurozone's main release was the business sentiment index in Germany from ZEW (The Centre for European Economic Research). The indicator fell sharply from -28.0 to -53.8, considered extremely low and even lower than periods where the economy was in lockdown.
Businesses in the Eurozone, especially in Germany, fear serious problems with energy resources and interruptions in the supply of components and raw materials. There have also been predictions that Russia may halt the exportation of gas and oil to Europe, resulting in shortages and rationing.
The market has also considered the latest comments made by the Vice-President of the European Commission, Mr. Dombrovskis, who said that the growth of the Eurozone economy seems to be stable this year. However, it is likely to decrease towards the end of the year. Inflation forecasts, according to the official, will be revised upwards.
Throughout the day, the market will mainly be focusing on June’s CPI figures and monitoring the price action. Traders are eager to see if the price will continue its attempt to stabilize below the parity level.
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