The Euro (EUR) declined by 0.12% to near 1.1460 against the US Dollar (USD) during the European trading session on Friday, as the US Dollar extended its advance on firm expectations that the Federal Reserve (Fed) will deliver more interest rate hikes this year [1]. The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, reached a fresh seven-week high near 100.50 [1]. According to a currency heat map, the USD was the strongest against the Japanese Yen, with a 1.12% gain, and also posted gains against the Euro, British Pound, and other major currencies [1].
Economists at UOB Group noted a shift in the US rates landscape, revising their expectation to "two further Fed rate hikes," which they argue will reverse the narrowing of US rate differentials relative to G-10 peers and support the DXY going forward [1]. Meanwhile, the Euro faced selling pressure as European Central Bank (ECB) officials, including President Christine Lagarde, pushed back fears of second-round inflation effects, easing concerns of an aggressive ECB monetary tightening cycle. Lagarde stated, "Not seeing second-round effects yet" [1].
Technical analysis shows EUR/USD trading at 1.1460, maintaining a bearish bias as the spot remains below the 20-period exponential moving average (EMA) at 1.1561. The Relative Strength Index (RSI) at 32.8 is just above oversold territory, indicating that downside momentum is dominant but may be losing some intensity [1].
Market implications suggest that the US Dollar's strength is likely to persist, underpinned by expectations of further Fed rate hikes and a reversal in US rate differentials. The Euro's weakness is compounded by the ECB's cautious stance on inflation and monetary tightening [1].
CONCLUSION
The EUR/USD pair is under pressure as the US Dollar strengthens on expectations of additional Fed rate hikes, while the Euro faces headwinds from a less aggressive ECB stance. Technical indicators point to continued downside momentum, though intensity may be waning. Market sentiment favors the US Dollar in the near term, with medium impact on currency markets.