EUR/USD decline towards 0.9900 as odds soar for a full percent Fed rate hike
- EUR/USD is aiming to scale lower towards the critical support of 0.9900 amid hawkish Fed bets.
- As per the CME FedWatch tool, more than 80% odds are favoring a 75 bps rate hike.
- Germany is exploring its all measures to create sufficient gas inventories for catering winter season.
The EUR/USD pair is auctioning around the critical support of 0.9960 in the Tokyo session. The asset is expected to deliver a downside break of the long-week consolidation formed in a range of 0.9946-1.0050. The major will face an intense sell-off as investors are placing bets on a bigger-than-expected rate hike now.
Earlier, investors were expecting a third consecutive rate hike by 75 basis points (bps) to step up the interest rates to 3-3.25%. Now, a full percent rate hike alternative has also joined the race to bring price stability sooner. Risk-perceived assets are surrendering their pullbacks and attracting offers from market participants.
The recent reading of the inflation rate at 8.3%, higher than the expectations of 8.1%, has dented the market sentiment. No doubt, the price pressures are declining but the rate of decline is not lucrative in comparison with the pace of hiking interest rates. Therefore, the odds of a 100 bps rate hike by the Fed have hogged the limelight.
On the Eurozone front, the German government is exploring its all measures to make sure that the administration must have sufficient energy inventories to cater to the elevated demand during the winter season. The government has promised to bail out the giant German gas importer Uniper but taking a 30% stake in the board. The company delivered extreme losses after Russia cut off gas supplies to Germany deliberately.
Also, the European Central Bank (ECB) is providing hawkish guidance on interest rates so that higher inflation rates should not settle in the economic behavior.