Is the Fed Outpacing the ECB in Hawkishness?

Is the Fed Outpacing the ECB in Hawkishness?

The EUR/USD pair is facing pressure as the US dollar strengthens following robust US labor market data and hawkish comments from Federal Reserve officials.

ECB’s Stance and Euro Resilience

The EUR/USD remains above $1.07, still close to last week’s nine-month high of $1.1034, supported by the European Central Bank’s (ECB) commitment to aggressive rate hikes. ECB board member Isabel Schnabel noted that past rate increases have had little impact on inflation. The ECB raised rates by 50 basis points in February, bringing them to the highest level since 2008, with another similar hike expected next month. ECB policymaker Klaas Knot acknowledged that headline inflation may have peaked but suggested further hikes could extend into May if core inflation remains high.

Fed Signals Further Tightening

The US dollar saw increased demand after stronger-than-expected US jobs data last Friday. Federal Reserve Chair Jerome Powell emphasized the need for higher interest rates, while New York Fed President John Williams stated that the labor market remains strong and that further rate hikes are necessary. Additionally, Fed Governor Christopher Waller warned that interest rates could climb higher than previously anticipated.

Technical Outlook on EUR/USD

From a technical standpoint, the EUR/USD appears biased toward downside risk on the 4-hour chart. The pair is trading below all major moving averages, with the 20-SMA crossing below the 200-SMA near a key resistance level. Momentum indicators remain in negative territory, and the RSI has turned slightly lower, hovering around 40.

Summary

While the ECB remains committed to rate hikes, strong US economic data and a hawkish Fed stance continue to support the US dollar. Traders will closely monitor upcoming data releases and central bank signals for further market direction.