- EUR/USD slides to the monthly low near 1.1362 amid caution ahead of the Fed’s policy.
- Investors await German and Eurozone preliminary HICP data for July.
- ECB’s Kazimir stresses the need for at least one interest rate hike amid high inflationary pressures.
The Euro (EUR) falls to its monthly low at around 1.1362 against the US Dollar (USD) during the early European trading session on Tuesday. The major currency pair weakens as the US Dollar extends gains amid caution ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally higher, closer to its monthly high of around 101.59.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.24% | 0.34% | 0.05% | 0.22% | 0.48% | 0.66% | 0.37% | |
| EUR | -0.24% | 0.08% | -0.19% | -0.02% | 0.25% | 0.42% | 0.13% | |
| GBP | -0.34% | -0.08% | -0.39% | -0.07% | 0.17% | 0.33% | 0.04% | |
| JPY | -0.05% | 0.19% | 0.39% | 0.16% | 0.43% | 0.61% | 0.23% | |
| CAD | -0.22% | 0.02% | 0.07% | -0.16% | 0.24% | 0.44% | 0.15% | |
| AUD | -0.48% | -0.25% | -0.17% | -0.43% | -0.24% | 0.17% | -0.12% | |
| NZD | -0.66% | -0.42% | -0.33% | -0.61% | -0.44% | -0.17% | -0.29% | |
| CHF | -0.37% | -0.13% | -0.04% | -0.23% | -0.15% | 0.12% | 0.29% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
In the policy meeting, the Fed is highly expected to leave interest rates unchanged in the range of 3.50%-3.75%. The CME FedWatch tool shows a 62% chance that the Fed will maintain the status quo.
Investors will pay close attention to the Fed’s monetary policy statement and Chairman Kevin Warsh’s press conference to get fresh cues regarding inflation and the economic outlook. The Fed is unlikely to deliver any remarks regarding the monetary policy outlook, as Warsh said in its last policy press conference that “so-called forward guidance is not well-suited in the current policy juncture”.
The CME FedWatch tool shows that the odds of the Fed delivering an interest rate hike in the next policy meeting in September are 80.8%.
On the Eurozone front, investors await the German and Eurozone preliminary Harmonized Index of Consumer Prices (HICP) data for July, which will be released on Thursday and Friday, respectively.
Investors will closely track the inflation data as it is expected to significantly influence European Central Bank (ECB) interest rate expectations. On Monday, ECB Governing Council member and Governor of the National Bank of Slovakia (NBS), Peter Kazimir, said that at least one interest rate hike will be needed to contain elevated inflationary pressures.
