EUR/USD trim gains in the wake of ECB rate hike; hawkish remarks from central bankers in focus

• EUR/USD rally curtailed following the ECB rate hike and hawkish remarks from central bankers.
• US Consumer Sentiment improves, supporting a stronger USD; Eurozone inflation slows as expected.
• Hawkish stances by both ECB and Fed officials hint at potential further tightening.
• Upcoming key events include the German May PPI, the EU’s General Council meeting, and US housing market data.

EUR/USD rally stalled in the aftermath of the European Central Bank (ECB) rate hike, trimming some of its previous day’s gains amidst mixed market sentiment. Following the Federal Reserve (Fed) and the ECB’s decisions, central bank speakers are grabbing the most headlines, amidst the lack of news, besides Eurozone (EU) inflation. At the time of writing, the EUR/USD is trading at 1.0920, down 0.23%.

Mixed market sentiment following central bank decisions, Eurozone inflation slows down.

Market participants’ sentiment is mixed, as shown by US equities. The latest round of economic data from the United States (US showed an improvement in Consumer Sentiment, as revealed by the University of Michigan (UoM) at 68.0 vs. May’s Final 64.9. Regarding inflation expectations for a one-year period, they were downward revised from May 4.2%, while June data came at 3.3%.

The EUR/USD weakened amidst a raft of Federal Reserve and European Central Bank officials’ commentary, with postures leaning toward the hawkish side of monetary policy. It should be said the American Dollar (USD) is showing signs of strength, as the US Dollar Index (DXY) edges up 0.21%, at 102.364.

In the Eurozone (EU) front, inflation data slowed down as expected to 6.1% YoY in May, below April’s 7% reading. Meanwhile, two ECB central bankers, Mario Centeno and Pierre Wunsch, delivered hawkish remarks, suggesting that more rate hikes are needed. Mario Centeno added that “the risk of interest rates rising again” exists if prices do not slow. Meanwhile, Pierre Wunsch said, “ECB could hike rates again in September unless there is a substantial drop in core inflation.”

Across the pond, Federal Reserve officials, although moderated in June’s FOMC meeting, are struck with a hawkish stance after the decision. Richmond Fed President Thomas Barkin said that he’s “comfortable doing more” if inflation does note recedes. Later, Fed Governor Christopher Waller later added that slow progress on inflation “will probably require some more tightening.”

The EUR/USD retraced some of its weekly gains. The Fed and ECB stances are on the table, and with both central banks headed for 50 bps of further tightening, it could spur some consolidation in the EUR/USD.

Upcoming events

Eurozone docket: It would feature German May PPI, EU’s General Council meeting, June’s Consumer Confidence Flash, and GDP figures in Spain, alongside S&P Global PMIs for Spain, Germany, France, and the bloc.

US economic agenda: Fed speakers, housing market data, and S&P Global PMIs.

EUR/USD Price Analysis: Technical outlook

From a technical perspective, the EUR/USD remains upward biased, set to test the 1.1000 figure. The daily Exponential Moving Averages (EMAs) are well located below the exchange rate, suggesting further upside is expected. Still, the three-day Rate of Change (RoC) portrays buyers are losing momentum, and the Relative Strength Index (RSI) indicator, remains in bullish territory but shifted flat. Upside risks lie at 1.1000, followed by the YTD high at 1.1095. Contrarily, a drop below 1.0900 could expose the 50-day EMA at 11.0820, ahead of the confluence of the 20-day EMA and June’s 15 daily low of 1.0803/05