Where we are: EUR/USD is trading at 1.1465, down 0.03% on the day and hovering near recent lows. The pair has seen a tight overnight range, failing to recapture the 1.1480 mark and sitting below the prior New York close. We’re looking for a catalyst to break this inertia ahead of US data.
What’s driving it: The dominant theme remains the European Central Bank’s hawkish pivot. Following the recent 25bp hike to 2.25%, the ECB is signalling a tightening bias, with inflation at 3.2% and core prices at 2.5% prompting upward revisions. Markets are pricing in a roughly 50% chance of another hike in September, though a sustained retreat in energy prices could temper this. The Eurozone unemployment rate held steady at 6.3% in April, providing a stable backdrop but no immediate impetus.
- ECB’s recent 25bp hike and hawkish forward guidance.
- Inflation prints showing HICP at 3.2% and core at 2.5%.
- Net non-commercial positioning is modestly long at +13,932 contracts, but down significantly week-on-week, suggesting some unwinding of longs.
NY session focus: Today’s calendar is dominated by ECB President Lagarde’s speeches at 15:00 CET and 17:25 CET. These will be crucial for gauging the Governing Council’s sentiment on the inflation outlook and the path forward for rates. We’ll be watching for any hints that could solidify or derail September hike expectations. The US 08:30 ET data print will also be key, particularly if it deviates significantly from expectations and impacts the DXY. The trade that’s working is fading rallies, but the pain trade here would be a hawkish surprise from Lagarde that forces a rapid re-pricing of the September hike, sending EUR/USD sharply higher.