EUR/USD Price Prediction – Euro Moves Higher After Powell’s Comments

Key Insights

• EUR/USD gains ground as Powell’s testimony is not as hawkish as expected. 
• Treasury yields pull back, putting additional pressure on the American currency. 
• Euro bulls focus on Fed’s comments and Treasury yields, ignoring problems of the European economy. 

U.S. Dollar Is Under Pressure

EUR/USD moved higher after Fed Chair Jerome Powell has started to deliver his testimony to the Congress.

Powell noted: “We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”

Talking about inflation, Powell added that “inflation has obviously surprised to the upside over the past year, and further surprises could be in store.”.

It looks that markets expected more hawkish comments from Powell. The U.S. Dollar Index has started to lose ground during his testimony. Treasury yields, which are extremely sensitive to Fed’s comments, have moved lower. Meanwhile, S&P 500 futures, which have been under significant pressure ahead of the market open, have moved back into the positive territory.

Euro Bulls Ignore Problems Of The European Economy

While U.S. natural gas prices have been under pressure after the explosion at Freeport LNG, European natural gas prices kept moving higher after Russia’s Gazprom reduced supplies, citing sanctions-related maintenance issues.

As energy gets more expensive, the European economy will face higher inflation and lower growth, but euro bulls do not look worried about this at the moment. At this point, it looks that traders believe that the U.S. dollar was overbought and are ready to increase their positions in riskier currencies like euro.

In addition, expectations of more aggressive moves from the European Central Bank serve as a positive catalyst for the European currency.

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