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Euro may gain as ECB guidance vs Fed uncertainty shifts EUR/USD outlook
DBS expects ECB affirmations of its rate path to help EUR/USD break above the 1.1360 to 1.1480 range, while Fed Chair Kevin Warsh’s push to end forward guidance could raise an uncertainty premium into September.
FXStreet highlights DBS Group Research’s view that the euro could find support in the coming weeks as investors reassess geopolitical risk and differences in central bank communication between the European Central Bank and the Federal Reserve.
DBS points to the ECB’s planned tactical pause flagged for its July 23 governing council meeting, alongside market pricing of an 87.8% chance of a 25 basis point hike to 2.50% at the September 10 meeting. If the ECB confirms that trajectory, DBS said EUR/USD may be able to break above the month’s tight trading range of 1.1360 to 1.1480.
On the US side, the research notes Kevin Warsh’s testimony to lawmakers, which DBS characterizes as aimed at restoring an uncertainty premium around September rate expectations. FXStreet says Warsh plans to use the July 28 to 29 FOMC meeting to encourage discussion with colleagues about Fed forward guidance.
Latest closeEUR/USD 1.145 ▼0.2%