EUR/USD turns sideways below 1.0000 ahead of Fed Powell’s speech and ECB policy

• EUR/USD is juggling below the 1.0000 parity as investors have sidelined ahead of ECB policy.
• ECB Lagarde is expected to hike the interest rates by 75 bps to 1.25%.
• A hawkish stance on interest rate guidance is expected from Fed Powell to trim inflation impact.

The EUR/USD pair is auctioning back and forth in a narrow range of 0.9979-0.9994 in the Asian session. The asset has shifted into a time-correction phase after failing to sustain above the magical figure of 1.0000. A lackluster performance is expected from the asset till the announcement of the interest rate decision by the European Central Bank (ECB).

As the ECB is bound to combat the dual threat of soaring price pressures and bleak economic growth, the extent of a rate hike will be critical for the old continent. ECB’s preferred inflation indicator, Harmonized Index of Consumer Prices (HICP) has crossed the whopping figure of 9%. Thanks to the soaring energy prices, which are scaling energy bills higher and eventually, price pressures.

While, growth prospects in eurozone are dim amid supply chain bottlenecks, regional development imbalance, and a deepening energy crisis ahead of the winter season. Therefore, a bumper rate hike could trim the growth prospects significantly.

Considering the market consensus, ECB President Christine Lagarde will announce a rate hike of 75 basis points (bps). This will step up the interest rates to 1.25%.

Meanwhile, the US dollar index (DXY) is auctioning in a balanced market profile which will demolish after the speech from Fed chair Jerome Powell. Fed Powell is expected to dictate the likely monetary policy action this month and adaptation of a ‘hawkish’ stance is highly expected as households are still facing the headwinds of higher payouts and inflation-adjusted paychecks. The inflation rate is needed to scale down sooner otherwise consumer confidence will drop significantly.