EURUSD is falling deeper. Overview for 22.03.2022

EURUSD continues falling; the asset is getting weaker.

The major currency pair continues trading downwards on Tuesday. The current quote for the instrument is 1.1008.

There are no important macroeconomic statistics today but investors have a lot of other things to pay attention to. 

The US Fed Chairman Jerome Powell spoke yesterday and said that the next rate hike might be 50 basis points if necessary. According to his estimations, the labour market is looking strong and inflation – persistently high. Powell believes that the regulator has to take measures to get back to CPI stability. 

The regulator has 6 more meetings ahead this year, and the rate might be increased during each of them. However, the Fed might decide to raise the rate by 50 basis points as early as May. Current market expectations imply a 60% probability of such a scenario. 

In the meantime, inflation expectations in the US remain at all-time highs. According to the Federal Reserve Bank of St. Louis, average inflation expectations for 10-year bonds are 2.90%. the highest reading was recorded on 11 March, 2.94%.

The higher inflation expectations, the more chances the Fed will continue raising the rate quicker and more aggressive. 

For the “greenback”, everything that is happening is rather neutral – all this have already been included in prices. The American currency is strong due to the high demand for “safe haven” assets – the USD is doing an excellent job here.