In the view of economists at Scotiabank, the EUR/USD pair is set to move downward as Fed’s hawkishness and the ongoing war in Ukraine weigh on the shared currency.Widening yield spreads and war risk weigh on the euro
“Markets are already showing around an 85% chance of two 25bps hikes in 2022 – which we think is the most that the ECB will hike by this year – so there is limited scope for EUR gains on a more hawkish tone from the ECB.”
“With the Fed moving more aggressively and overshooting its neutral rate, yield differentials will remain a EUR headwind over the next few quarters.”
“We see the EUR aiming for a re-test of 1.08 in coming days/weeks on war and Fed/ECB risks.”
EUR/USD clings to modest gains above 1.1000.EUR/USD trades in positive territory above 1.1000 in the second half of the day, supported by the modest selling pressure surrounding the greenback. With Wall Street’s main indexes edging higher after the opening bell, the US Dollar Index stays in the red below 98.50.
GBP/USD climbs to fresh two-week high above 1.3250.GBP/USD preserves its bullish momentum in the American session and trades at its highest level in two weeks above 1.3250. The risk-positive market environment, as reflected by rising European and US stock indices, seems to be weighing on the dollar.
Gold plunges below $1,920 on surging US T-bond yields.Gold came under renewed bearish pressure in the American trading hours on Tuesday and fell below $1,920. The 4% increase witnessed in the benchmark 10-year US Treasury bond yield and the improving market mood weigh heavily on the yellow metal.