Published on 03.05.2022 12:21

The dollar is heading towards a 20-year high in today’s trading session and is trading just below the $1.05 mark as investors gear up for a busy few day of economic news which includes the latest interest rate decision from the US Federal Reserve

Investors are expecting the Fed to hike rates by 50 basis points when it meets on Today and Tomorrow and some analysts have not ruled out the possibility of a 75 basis points hike as the Fed tries to reign in runaway inflation.

There is still some uncertainty of how hawkish Fed president Jerome Powell will sound in his monetary speech after the interest rate decision, but many expect him to put the market on notice that further rate hikes are on the way as unfolds

Higher rates in the US, coupled with an expected slower rate of European Central Bank tightening and worries about the impact of the war in Ukraine are the main things affecting the Euro and the chances this week of the European currency hitting its lowest level since 2002 against the greenback are growing by the day.

Looking ahead today, the main driver of the EUR/USD currency pair will be a speech by European Central Bank boss Christine Lagarde with investors looking for any signs of a potential rate hike in the Eurozone over the next few months.

Although Lagarde’s speech may cause some volatility, many market participants may choose to sit on the sidelines and await the Fed interest rate decision tomorrow which is shaping up to be the biggest economic news of the year so far.


Andrew Masters

Analyst

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