The Euro continues to strengthen against the U.S. dollar as we enter today’s European trading session as investors turn positive on the European currency ahead of a policy-setting meeting at the European Central Bank later today.
It was probably time for the greenback to take a breather considering it latest bull run against all of the major currencies on the back of an expected 50 basis point rate hike this month from the US Federal Reserve which means the interest rate hike may now be priced into the market.
"The dollar has just been on quite a tear for weeks now, and I think the run up to the ECB meeting is providing a convenient excuse for the market to book some profit in the dollar's gains," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
Although the market is not anticipating any interest rate changes from the ECB at today’s meeting, the focus will be on a more hawkish tone from ECB President Christine Lagarde that could set the stage for a possible rate hike later in the year.
The ongoing war between Ukraine and Russia is fueling concerns about economic growth for the nearest future in the Euro block and the may cause Mrs Lagarde to take a more cautious tone with regards to raising rates and would cause the Euro to give up the last 2 days of gains.
Looking further ahead today, the other main drivers of the EUR/USD currency pair will be the release of retail sales figures from the US as well as the Michigan consumer sediment index during the American session.
A good reading from both of these important indicators is going to reaffirm investors predictions that the Fed is on track to lift interest rates aggressively this month.