June 16 (Reuters) – The post-meeting battle of jawboning central bank officials has begun and, if EUR/USD is any guide, the ECB is beating the Fed.
EUR/USD set another one-month high as comments from a slew of ECB speakersreinforced investors’ expectations of a July rate hike while Bundesbank President Joachim Nagel and Belgian Policymaker Pierre Wunsch left the door open to an increase in September.
Federal Reserve Governor Christopher Waller and Richmond Fed President Thomas Barkin also suggested U.S. rates may have to rise again, but price action indicated that traders gave more weight to the ECB speakers, with EUR/USD rising toward the daily cloud top before taking a breather.
U.S. short-term rates markets betrayed doubts the Fed hike past July. CME’s FedWatchTool indicated a 25bp hike for July with rates then being held steady until December, where the probability of a rate cut sits near 40%. https://tinyurl.com/yfj43vd9
Unless the Fed convinces investors multiple hikes are coming or U.S. data significantly improves EUR/USD risks are likely tilted to the upside.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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