The EUR/USD pair is displaying back and forth moves in a narrow range of 1.0730-1.0740 in early Tokyo. The major displayed a sheer reversal on Tuesday after hitting a low of 1.0679. A firmer rebound in the shared currency bulls is backed by rising odds of a rate hike by the European Central Bank (ECB) in its June monetary policy.
Soaring inflation in the eurozone is demanding the deployment of quantitative measures, which will incorporate a ceiling on the inflationary pressures. On Tuesday, Eurostat reported the annual Harmonized Index of Consumer Prices (HICP) at 8.1% vs. the expectation of 7.7% and the prior print of 7.4%. A significant upside in the inflation numbers in Europe is compelling for an end of the lower rates cycle and rate hikes will be featured by the ECB in its upcoming monetary policy meetings.
Meanwhile, ECB Chief Economist Philip Lane has advocated two consecutive interest rate hikes by 25 basis points (bps) in June and September. This has bolstered the odds of a rebound in the ECB’s interest rate curve.
Going forward, investors will focus on the speech from ECB President Christine Lagarde and the release of the eurozone Unemployment Rate. Considering the galloping inflation levels, investors should brace for hawkish commentary from ECB’s Lagarde. While the eurozone Unemployment Rate is seen at 6.7% against the prior print of 6.8%.
On the dollar front, the US dollar index (DXY) is experiencing barricades around 101.80 ahead of the ISM Manufacturing PMI, which is seen lower at 54.5 against the former figure of 55.4.
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