EUR/USD declines to near 0.9880, ECB policy and Fed Powell’s speech eyed

• EUR/USD has slipped to near 0.9880 as the DXY has strengthened after a rebound in Services PMI.
• Investors should brace for a 50 bps rate hike announcement by the ECB.
• The Eurozone energy crisis will deepen further as the winter season will have more gas demand.

The EUR/USD pair has dropped to near 0.9880 as the US dollar index (DXY) has strengthened after a fresh rally kicked in. The asset extended its losses in the Asian session after surrendering the round-level support of 0.9900. Considering the overall context, the asset is expected to print fresh lows in no time.

The DXY has recorded a fresh two-decade high at 110.65 in the Asian session. The asset has displayed a juggernaut rally after the release of upbeat US ISM Services PMI data on Tuesday. The Non-Manufacturing ISM data landed at 56.9, higher than the estimates and the prior release of 55.1 and 56.7 respectively. A surprising improvement in the Services PMI strengthened the mighty US dollar index (DXY).

Going forward, the speech from Federal Reserve (Fed) chair Jerome Powell will hog the limelight. As price pressures in the US economy are highly deviated from the desired rate of 2% despite showing exhaustion signals, Fed Powell will sound hawkish and will most likely discuss a third consecutive 75 basis points (bps) rate hike.

On the eurozone front, investors are awaiting the announcement of the interest rate decision by the European Central Bank (ECB). As per the consensus, ECB President Christine Lagarde will announce a rate hike by 50 basis points (bps). The ECB is required to take informed steps on restrictive monetary policies due to regional imbalance.

Also, soaring energy prices are a big concern for the trading bloc. Russia has cut off gas supplies to Europe through Nord Stream 1 pipeline in response to western sanctions levied on Russia. As the winter season is on doors and will demand more energy, the eurozone energy crisis is deepening further.