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07.02.202210:35 Forex Analysis & Reviews: EUR to hit three-week high; USD rises amid hawkish Fed rhetoric

Following data published on Monday morning, the euro almost hit Friday's three-week high. According to analysts, there is little chance of further short-term growth as the looming Fed policy tightening supports the US dollar.

Investors are looking forward to Thursday's US inflation data, which is on tap on Thursday. A strong reading will increase the possibility of the key rate hike by the Fed in March.

The euro was at $1.1451, close to Friday's level of $1.4183.

After the publication of revised US jobs data at the end of the week, the US dollar index reached the level of 95.461. The economy added 467,000 new jobs, So, the figure significantly exceed the forecast.

The US dollar is expected to grow further in the short term.

"We see the risk of more USD upside in the near-term if interest rate markets price a greater chance of a 50bp hike in March. But last week's hawkish turn by ECB President Christine Lagarde suggests any upside in the USD will be capped, "Joe Capurso, the Head of International Economics at Commonwealth Bank of Australia, commented on the situation.

At a press conference, ECB President Christine Lagard said she no longer excludes an interest rate increase this year. The hawkish statements were bullish for the euro.

Therefore, in a short term, the ECB and the Fed are likely to tighten monetary policy.

As for Futures on Forex, they dropped. Traders are factoring in a 33% chance of a 50 basis point rate increase in March amid strong US jobs data. The interest rate is likely to reach 1.5% by the end of the year.

US Treasury yields jumped by 11 basis points, amounting to 1.32%.

The 10-year yield was up 9 basis points and at 1.9049% by the end of the week.

This week, the heads of the Fed, BoE, ECB, as well as the RBA and Bank of Canada, will give speeches.

Anastasia Miller,
Analytical expert of InstaSpot
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