EUR/USD Pauses Ahead of ECB Decision as Dollar Strength Fades
The EUR/USD pair has been trading in a tight range of 1.15 to 1.17 for most of the quarter, holding steady at around 1.1629 through Friday's US payroll surprise. Despite a blowout jobs number, the dollar strength did not last long.
This week marks a rare event where both sides of the pair face hawkish central bank events, with the European Central Bank deciding on Thursday and the Federal Reserve voting next Wednesday. The market is expecting a 25-basis-point increase in the deposit rate to 2.50% from the ECB, while Fed hike odds are running near 60%.
The euro has been supported by expectations of an ECB hike, which investors believe will help respond to rising inflation risks. However, concerns about US government debt and policy uncertainty have added a drag on the dollar.
The technical read from Friday's close suggests that EUR/USD defended pivotal support for a second consecutive week. The pair now faces its next test in Lagarde's press conference on Thursday and the composition of Friday's US CPI print.