EUR/USD consolidates after a wild ride on Tuesday, bulls eye parity ahead of ECB and Fed

• EUR/USD is under pressure in Asia, unable to cling to the high seen overnight.
• The US dollar was sold off heavily in a switch-up in market sentiment. 

EUR/USD rallied hard to the upper quarter of the 0.99 area and bulls were eyeing a move into parity before the day was up but were left stranded in a phase of consolidation. In Asia, there has been little in the way of follow-through and the price has trickled lower between 0.9967 and 0.9943.

Federal Reserve officials are in a quiet period through the Nov. 1-2 Federal Open Market Committee meeting and sentiment is left to dictate the direction of markets based on economic data. A change of heart is apparent in fixed income and risk on appetite has dominated the week as investors ponder as to whether the Federal Reserve's path of interest rate hikes is about to switch up due to the cracks in the economy. Consequently, this has been sinking yields and the US dollar along with it. 

The dollar index, DXY, which measures the greenback vs. a basket of currencies fell to a low of 110.759 on Tuesday from a high of 112.127 in a sizeable drop that led to strong and rapid gains in risk assets and forex, such as the euro. The index is now below the 111 mark, a level not seen in almost three weeks, as speculation that the Federal Reserve would slow the pace of interest rate hikes later this year has diminished the greenback's appeal.  

ECB in focus

In the eurozone, business expectations improved modestly in October according to data released earlier Tuesday, but the current assessment declined, leaving the business climate measure virtually unchanged. The European Central Bank meets on Thursday when a 75 basis point increase is expected.''We expect the ECB to repeat Sep's 75bps hike at the Oct meeting, taking the Depo Rate to 1.50%, and leaving it arguably in the middle of the range that the ECB considers being "neutral", analysts at TD Securities said. ''While the growth outlook has deteriorated recently, with inflation surging to 9.9%, the ECB will likely emphasise the risk that higher inflation expectations become entrenched.''