EUR/USD sees downside below yearly lows at 1.0770, focus shift to Fed Powell’s speech

• EUR/USD sees more weakness below 1.0770 on a firmer DXY.
• The ECB will shift to rate hike measure after the conclusion of the ‘Asset Purchase Program’.
• This week Fed Powell’s speech and the release of the EURO’s core CPI will remain in focus.

The EUR/USD pair is hovering around the yearly lows at 1.0769 as investors await the final speech from Federal Reserve (Fed) Chair Jerome Powell before the mega event of monetary policy announcement in May.

The pair has remained vulnerable in the past few trading sessions after the European Central Bank (ECB) maintained its status quo by keeping the policy rates unchanged. After recognizing the elevated inflation levels and stagnant growth rate in the eurozone due to the Ukraine crisis, the ECB preferred to take the bullet itself and went for an unchanged interest rate decision along with neutral guidance.

The ECB dictated that a rate hike decision will get exposed only after the central bank would conclude the ‘Asset Purchase Program’ (APP), which is expected to happen in the third quarter. Currently, higher energy bills are dampening the confidence of the households and corporate.

Meanwhile, the US dollar index (DXY) is inching closer to the 101.00 amid elevated bets on a tight monetary policy by the Fed. St. Louis Fed President James Bullard in his speech on Monday has stated that a 3.5% interest rate is the minimum needed to be achieved this fiscal year.  In order to achieve the 3.5% interest rate, the Fed needs to bank upon 50 basis points (bps) rate hike each time in the remaining six interest rate decisions in 2022.

Going forward, the speech from Fed Chair Jerome Powell will hold more importance. However, investors will also focus on the core Consumer Price Index (CPI) to be released by Eurostat on Thursday. The yearly Euro’s core CPI is expected to land at 3%, similar to the prior figure.