EUR/USD skid below 1.0840 as Fed-ECB divergence underpins DXY

• EUR/USD is eyeing more downside to near 1.0800 on dovish ECB.
• ECB’s Lagarde sees inflation to get doubled by the end of this year.
• The DXY recovered swiftly as Fed’s Powell sounded aggressive on their policy stance.

The EUR/USD pair has witnessed a steep fall after failing to sustain above April 14’s high at 1.0923 as European Central Bank (ECB)’S President Christine Lagarde dictated a dovish stance at the International Monetary Fund (IMF) meeting on Thursday. The asset has experienced a sheer downside after sensing significant selling pressure above the psychological resistance of 1.0900.

ECB’s President Christine Lagarde emphasized downsizing growth forecasts amid the Ukraine crisis, which has resulted in the reduction of real income of households led by higher energy bills and food prices. ECB’s top official warned that the inflation is expected to zoom 100% by the end of this fiscal year and considering the lower growth rate, investors should brace for the end of the Asset Purchase Program (APP), but a rate hike needs potential time.

Meanwhile, the Eurozone Consumer Confidence has surprisingly jumped to -16.9 against the estimates of -20 and the prior print of -18.7. However, it failed to provide any material impact on the shared currency.

The US dollar index (DXY) rebounded sharply in the New York session after Federal Reserve (Fed) chair Jerome Powell sounded a tad more hawkish on the policy stance. An interest rate decision to hike by rates 50 basis points (bps) is on the cards and the Fed is highly expected to drop hawkish guidance too for the remaining year.