EUR/USD consolidates above 1.0900, follows footprints of sideways USD Index

• EUR/USD is oscillating above 1.0900 as the focus shifts to Fed Powell’s testimony.
• Investors would like to see whether Fed Powell would stand on guidance already delivered.
• ECB Lagarde has confirmed that a rate hike in the July meeting is appropriate.

The EUR/USD pair is demonstrating a non-directional performance above the round-level support of 1.0900 in the Asian session. The major currency pair is following the footprints of the sideways US Dollar Index (DXY), which is expected to provide action after Federal Reserve (Fed) chair Jerome Powell’s testimony.

S&P500 futures are showing nominal gains generated in Tokyo after reporting bearish sentiment on Tuesday. US equities posted negative returns on Tuesday as investors wrapped up their positions quickly after a long weekend.

The US Dollar Index has turned sideways after retreating from the 102.80 resistance awaiting Fed Powell’s testimony. No doubt, Fed Powell has already delivered hawkish guidance as labor market conditions are still tight and inflationary pressures are twice the desired rate. Investors would like to see whether Fed Powell would stand on guidance already delivered as the street is anticipating only one rate hike by year-end while the central bank guided two more interest rates.

On the Eurozone front, major contributors to stubbornly high inflation are the cost of food, alcohol, and tobacco while rising prices of services are the second contributor. Eurozone inflation has been recorded at 6.1% in its final reading, which is still thrice the required 2% rate and supports the need for further interest rate hikes.

The European Central Bank (ECB) has already pushed interest rates to 4% in June and ECB President Christine Lagarde has confirmed that a rate hike in the July meeting is appropriate.

Meanwhile, ECB policymaker Boris Vujčić has cited that regarding future policy actions, the central bank has to consider the risk of doing too much vs. too little, adding that a soft landing might not be possible.