EUR/USD leans bearish below 0.9900 on options market pessimism ahead of ECB, Fedspeak
07.09.2022, 05:55

EUR/USD leans bearish below 0.9900 on options market pessimism ahead of ECB, Fedspeak

EUR/USD remains on the back foot around the 19-year low marked the previous day, retreating to 0.9890 heading into Wednesday’s European session, as hawkish Fed bets join options market signals to weigh on the major currency pair.

Also keeping the pair bears hopeful is the cautious mood ahead of the European Central Bank (ECB) monetary policy meeting and a speech from Fed Chair Jerome Powell, scheduled for Thursday.

That said, one-month risk reversal (RR), a difference between the call and puts, braces for the second weekly loss, down to -0.140 at the latest, while portraying the options market’s bearish bias.

Elsewhere, the US Treasury yields rally to a fresh multi-day high to propel the US Dollar Index (DXY) towards renewing the two-decade top. The same joins hawkish Fed bets to weigh on the market sentiment and weigh on the EUR/USD prices. That said, the Fed Fund Futures print 75% chance of a 0.75% rate hike in September while the CME’s FedWatch Tool signals 72.0% chance of 50 basis points (bps) Fed rate hike in September versus 57% one-day ago.

Moving on, Germany’s Industrial Production and final reading of the Eurozone Gross Domestic Product (GDP) for the second quarter (Q2), expected to confirm 3.9% YoY initial forecasts, could entertain traders. However, Thursday’s ECB meeting and Fed Chair Powell’s speech will be crucial for the EUR/USD pair traders to watch for clear directions.

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