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August 26th - As markets closely watch for clues about the timing of the Bank of Japans next interest rate hike, BOJ watchers will be closely monitoring Deputy Governor Ryozo Himinos speech on Thursday. SMBC Nikko Securities strategist Ataru Okumura stated, "While there are limitations to how much a single speech by a BOJ deputy governor can guide market expectations, the focus will be on how firm his wording is on controlling inflation." Okumura added that although the bond market firmly expects the BOJ to raise rates sooner rather than later, investors doubt the banks ability to push rates above the restrictive level of 2%, making the future path of interest rates a key focus for the market.August 26th - According to the Financial Times, US Treasury Secretary Bessetts intervention in the bond market runs counter to the Federal Reserves efforts to curb inflation. Bessetts unexpected intervention in the US Treasury market caused yields to initially fall before rising, triggering a market reaction that puts greater pressure on Warshs speech in Jackson Hole on Friday. Warsh has consistently emphasized that investors should rely more on economic data and market prices rather than waiting for "forward guidance" from central bank officials to tell the market about future interest rate trends. There are now concerns that if Bessetts efforts to control yields remain ineffective, the Federal Reserve may also face pressure to intervene in the market. Warsh and Bessett are both protégés of billionaire Stanley Druckenmiller, and the two reportedly have a close relationship and meet frequently. However, the current impression is that their respective Treasury departments and the Federal Reserve are "moving in opposite directions."ECB Executive Board member Schnabel: At the current policy rate, inflation is unlikely to return to the target level in the medium term, and further tightening of policy will be necessary.ECB Executive Board member Schnabel: The risks to economic growth are slightly tilted to the upside.ECB Executive Board member Schnabel: Given the resilience of the economy, interest rates must be raised further.

EURUSD attracts sells below 1.0400 in anticipation of Lagarde's ECB address

Daniel Rogers

Nov 18, 2022 15:12

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The EURUSD lacks direction at 1.0365 on Friday morning after registering its first daily loss in three sessions. In a poor session preceding Christine Lagarde's speech as president of the European Central Bank, the primary currency pair reduces its weekly gains (ECB).

 

The inability of the US Dollar to justify the recovery in US Treasury yields from their six-week low has recently exerted pressure on the EURUSD bearish. The cautious optimism around US President Joe Biden's effort to relax student loan regulations and the most recent survey on the Fed's next move may also pose a danger to pair sellers.

 

The Biden administration will seek the Supreme Court to reinstate the student loan debt relief program, according to CNBC. On the other hand, the Philadelphia Fed Manufacturing Index and housing data for October may have put doubt on the Fed's recent hawkish language.

 

In addition, the most recent Reuters poll for the US Federal Reserve (Fed) indicates that the Fed will downshift in December to deliver a 50 basis point (bps) interest rate hike, but a longer period of US central bank tightening and a higher policy rate peak are the greatest risks to the current outlook.

 

Nonetheless, strong Fed language and weakening Eurozone data may be regarded as the pair's most recent difficulties. Thursday, James Bullard, president of the Federal Reserve Bank of St. Louis, remarked that the US Federal Reserve's (Fed) monetary policy is not now deemed restrictive enough to reduce inflation. In a similar vein, Neel Kashkari, president of the Minneapolis Federal Reserve Bank, stated: "With inflation remaining high and a substantial degree of monetary policy tightening already underway, it is questionable how high the US central bank will need to increase the policy rate."

 

Notably, a downward revision to Eurozone inflation data, as measured by the Harmonized Index of Consumer Prices (HICP), to 10.6% (final) in October from 9.9% (preliminary) in September also favored EURUSD bears the day before.

 

The benchmark 10-year US Treasury yields recovered from a six-week low before remaining roughly unchanged at 3.77 percent, while the S&P 500 Futures remain uncertain as of press time.

 

As the pair loses bullish momentum, a remark from ECB President Lagarde will be crucial for EURUSD price action in the immediate future. However, hawkish words from Lagarde and lower US Existing Home Sales statistics for October will keep bulls in play.

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