September 9, 2022 12:02 AM ET
By: AnalysisWatch
The EUR/USD pair staged a ferocious rally, breaking through the 1.0000 parity with considerable force.
The asset has regained its intraday high of 1.0080, and further gains are expected ahead of European Central Bank (ECB) Christine Lagarde's speech. EUR/USD is experiencing a bullish trading session, where every pullback is seen as a buying opportunity for market participants.
The EUR/USD is attracting huge bids as the U.S. The Dollar Index (DXY) collapses like a house of cards. The DXY has abandoned critical support at 109.00 and continues to fall on expectations of a contraction in U.S. inflation data, which will be released on Tuesday.
Comments from the U.S. Yellen on the inflation rate, indicating that low gasoline prices could put downward pressure on overall consumer price inflation for August, as reported by Reuters, is not being taken into account by market participants. A consecutive decline in the headline consumer price index (CPI) will confirm that inflationary pressures are reacting inversely to the Federal Reserve (Fed) interest rate hike.
A subsequent decline in the inflation rate is not enough to reduce the chances of an interest rate hike by 75 basis points (bps) because the current index of price increases is far from the desired rate of 2 percent.
In the Eurozone, the ECB's 75 basis point interest rate hike has eased the policy divergence between the Fed and the ECB. The ECB's decision to raise rates came at the expense of the growth outlook, as the trading bloc is expected to grow at an extremely low rate.
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