EUR/USD Holds Ground Around 1.0950 Amid Rate Hike Expectations

The EUR/USD exchange rate is consolidating its gains around 1.0950 during the early European morning. The pair is struggling to establish a clear direction as investors eagerly await speeches from Federal Reserve Chair Powell and European Central Bank President Lagarde for fresh guidance on interest rates. On Tuesday, the EUR/USD experienced an increase due to hawkish expectations from the European Central Bank and a relatively subdued performance of the US Dollar despite positive US economic data. The focus now shifts to inflation data.

During the ECB Forum, President Lagarde remarked that inflation in the Eurozone has entered a phase that may persist for some time, expressing confidence that central banks will eventually confirm the attainment of peak interest rates. According to Reuters, policymakers anticipate minimal likelihood of a pause in rate hikes in July or September due to persistent inflationary pressures.

These hawkish comments bolstered the Euro, which outperformed other currencies on Tuesday. On Wednesday, Italy is set to release its preliminary July Consumer Price Index, which could be influential in anticipating inflation trends not only in other countries (with Germany reporting on Thursday) but also across the Eurozone (on Friday).

Despite the US Dollar experiencing some losses on Tuesday, its decline remained limited following positive economic indicators from the United States. Moreover, expectations of a rate hike by the Federal Reserve in July continue to remain elevated. US yields increased during the American session, keeping the EUR/USD exchange rate around 1.0950. From a technical standpoint, there appears to be a favorable risk-to-reward opportunity for opening a long position.