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Euro Falls On Fed's Hawkish Shift

The euro weakened against its most major counterparts in the European session on Thursday amid risk aversion, as the U.S. Federal Reserve signaled an earlier tightening of monetary policy than previously projected amid mounting concerns over inflation.

The Fed projected two rate hikes in 2023, compared to March’s forecasts for no increase until 2024.

Fed Chairman Jerome Powell indicated that the members have started discussions about scaling back the bond purchase program given higher inflation and faster economic growth.

Global markets fell following the surprise hawkish shift from the Fed, while Fed fund futures now forecast a first hike by the end of 2022.

Final data from Eurostat showed that Eurozone consumer price inflation surpassed the central bank’s target for the first time in more than two years in May.

Consumer price inflation climbed to 2.0 percent from 1.6 percent in April. The rate came in line with the flash estimate published on June 1.

The actual inflation was the fastest since 2018.

The euro fell to a 2-1/2-month low of 0.8542 against the pound and held steady afterwards. The pair had ended yesterday’s deals at 0.8574.

The euro declined to more than a 2-month low of 1.1926 against the greenback and a fresh 5-week low of 131.75 against the yen from yesterday’s closing values of 1.1995 and 132.77, respectively. The euro may test support around 1.16 against the greenback and 130.00 against the yen.

In contrast, the euro recovered to 1.5779 against the aussie, 1.7040 against the kiwi and 1.4728 against the loonie, from its prior 3-day low of 1.5690, 6-day lows of 1.6892 and 1.4680, respectively. The euro is likely to find resistance around 1.60 against the aussie, 1.72 against the kiwi and 1.49 against the loonie.

The European currency touched a 9-day high of 1.0932 against the franc from Wednesday’s close of 1.0897. Should the euro rises further, 1.12 is possibly seen as its next resistance level.

The Swiss National Bank maintained its expansionary monetary policy to stabilize economic activity and price pressures.

Policymakers of the SNB retained the policy rate and interest on sight deposits at the bank at -0.75 percent.

The material has been provided by InstaForex Company – www.instaforex.com