EUR/USD is creeping in to test bull´s commitments at 1.0800
- EUR/USD bears are in the market, testing 1.0800.
- The Fed and US debt ceiling remains the key focus.
EUR/USD fell at the start of the week and remained on the back foot on Monday with the price testing the 1.08 level within a phase of consolidation for the main part. EUR/USD is down nearly 2% for the month reversing two straight months of gain while the US Dollar stays firm on the expectations grew that US rates will remain higher for longer.
The focus was on a chorus of Federal Reserve speakers at the start of the week with some hinting that the central bank still has more to go in tightening monetary policy. Firstly, Minneapolis Fed President Neel Kashkari argued that US rates may have to go “north of 6%” and St. Louis Fed President James Bullard said that the central bank may still need to raise by 0.5%.
The US Dollar is solid as money markets are pricing in a roughly 26% chance that the Fed will deliver another 25-basis-point rate hike next month. Also, expectations of interest rate cuts later this year have also been scaled back, with rates seen holding at around 4.7% by December.
Elsewhere, the debt ceiling deadline in the United States remains a concern. President Joe Biden and House Speaker Kevin McCarthy ended discussions on Monday with no headway made on how to raise the U.S. government’s $31.4 trillion debt ceiling and will keep talking with just 10 days before a possible default. ´´With the June 1 x-date rapidly approaching, markets will look for signs of progress on a debt ceiling deal,´´ analysts at TD Securities said.
While there have been positive overtures from both sides, the work is not yet complete. markets appear to be assuming that negotiations are a done deal, suggesting that any souring in tone as negotiations play out could upset risk sentiment,´´ the analysts added.