August 12, 2022 12:05 AM ET
By: AnalysisWatch
EUR/USD is trading near the 1.0300 level and is struggling to find demand across the board as the US dollar continues to rally.
Market sentiment remains mixed this Friday as investors reassess the Fed's rate hike expectations amid slowing inflation among U.S. consumers and factories, while officials at the world's most powerful central bank continue to advocate large rate hikes to tame stubbornly high inflation.
Mary Daly of the San Francisco Fed said early Friday that a 50 basis point rate hike in September "makes sense" given recent economic data, including inflation, but added that she was open to a larger rate increase if the data warranted it. Money markets now expect a 65% chance of a 50 basis point rate hike in September and a 35% chance of a 75 basis point hike.
While hoping that the Fed will continue on its rate hike path, investors are quickly buying into the U.S. dollar's losses, limiting the pair's upside attempts. U.S. Treasury yields have also continued their recent rise, with the benchmark 10-year bond rate remaining near a three-week high of 2.902%.
Meanwhile, markets are fully pricing in a 50 basis point rate hike by the ECB in September, but the increasing likelihood of a eurozone recession as the gas crisis worsens continues to hurt EUR bulls.
Attention now turns to eurozone industrial production and current account data for fresh trade stimulus.
The biggest risk remains the preliminary U.S. consumer sentiment index, which is expected later in NA and will reassess the likelihood of a Fed rate hike and its impact on dollar valuations.
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