EUR/USD trades with a mild positive amid subdued USD demand, remains below 1.0900
- EUR/USD regains some positive traction on Wednesday, albeit lacks follow-through.
- Subdued USD price action offers some support amid a more hawkish ECB outlook.
- Economic woes act as a headwind as traders await the release of the FOMC minutes.
The EUR/USD pair attracts some buying during the Asian session on Wednesday and recovers a part of the previous day's modest losses. Spot prices currently trade just below the 1.0900 round-figure mark, up 0.10% for the day, though remain in a familiar range held over the past week or so.
The European Central Bank (ECB) policymakers struck a more hawkish tone last week, saying that they expect to raise rates again at both the July and September meetings. Adding to this, ECB President Lagarde noted that inflation has entered a new phase that could linger for some time and added that it is unlikely that they, in the near future, will be able to state with full confidence that interest rates have peaked. This, in turn, is seen as a key factor that continues to lend some support to the shared currency, which, along with subdued US Dollar (USD) price action, provides a modest boost to the EUR/USD pair.
The Federal Reserve (Fed) signalled in June that borrowing costs may still need to rise as much as 50 bps by the end of this year. Furthermore, Fed Chair Jerome Powell's said last week that the central bank doesn't see rate cuts happening any time soon and is going to wait until it is confident that inflation is moving down to the 2% medium-term target. That said, the softer US PCE Price Index released on Friday, along with Monday's weaker US ISM PMI, raises questions over how much headroom the Fed has to continue raising interest rates. Hence, the market focus remains on the June FOMC meeting minutes.
Investors will closely scrutinize the minutes for fresh cues about the Fed's future rate-hike path, which will play a key role in influencing the near-term USD price dynamics and drive the EUR/USD pair. In the meantime, worries about economic headwinds stemming from rapidly rising borrowing costs might hold back traders from placing aggressive bullish bets around the major. Meanwhile, the Euro Zone macro data - final Services PMI and the Producer Price Index (PPI) - might do little to provide any impetus, suggesting that spot prices could extend the range-bound price action witnessed over the past week or so.
Technical levels to watch