EUR/USD: the fundamental outlook remains unclear

The likely slowdown in Fed tightening benefits EUR/USD

EUR/USD continues to move higher after a difficult start to the week. The exchange rate is supported by some fragility in the dollar as the Fed minutes on Wednesday evening confirmed that the FOMC would be ready to slow its monetary policy tightening.
Investors’ focus is now on the ECB minutes, which will be published this afternoon.
In contrast to the Fed protocol, the ECB protocol could confirm a continuation of the pace of monetary tightening, given the persistent inflation, which continues to accelerate while decelerating (gently) across the Atlantic since the beginning of the summer.

The underlying outlook for EUR/USD, which was undeniably bearish until recently, is now becoming more mixed as the ECB may henceforth become more aggressive than the Fed in its monetary tightening.

Even so, it is not yet certain that the dollar has peaked, because it is not impossible that the Fed raises its interest rates higher and longer than expected. The Fed may raise its interest rates beyond the terminal rate currently expected by operators to 5% if inflation and wages continue to grow at excessive levels. The next financial data will therefore be decisive.

EUR/USD Daily Price Chart – Key Levels

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