EUR/USD bulls move in on a correction of the US dollar's parabolic rally

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EUR/USD bulls step in and give some much-needed stability to an otherwise sinking ship.
The US dollar has been lit up by the Fed’s hawkish narrative at the end of the week.

EUR/USD is attempting to correct from the lows of the day so far and is back to a flat position in the third hour of Tokyo’s session. The single currency has travelled between a range of 1.0069 and 1.0092 so far for the final day of the week.

In Tokyo’s open the greenback was lit up by news that President Xi Jinping and Russian leader Vladimir Putin are planning to attend a Group of 20 summit in the resort island of Bali later this year, according to Indonesian President Joko Widodo. This was reported by Bloomberg:

“Xi Jinping will come. President Putin has also told me he will come,” Jokowi, as the president is known, said in an interview with Bloomberg News Editor-in-Chief John Micklethwait on Thursday. It was the first time the leader of the world’s fourth-most populous nation confirmed both of them were planning to show up at the November summit.

The greenback benefitted from some initial risk-off given that this could stir up some geopolitical angst given the Ukraine crisis. For instance, the West could decide to boycott the gathering, for instance. In an interview with ZDF, European Commission President Ursula von der Leyen said that: “We have to consider very carefully whether we paralyze the entire G20; I don’t advocate that. In my opinion, G20 is too important, also for the developing countries, the emerging countries, that we should let this body be broken by Putin.”

Meanwhile, the hawkish narrative at the Federal Reserve due to Fed speakers on Thursday had already been seeing the US dollar run higher.

At the start of the North American day, San Francisco Federal Reserve Bank President Mary Daly crossed the wires and said in an interview with CNN it was way too early to declare victory on inflation and that said either a 50 basis point or a 75 basis points hike would be appropriate. Daly’s comments were later accompanied by other Fed speakers who were equally if not more hawkish than she was, hammering in the nail for the euro during the session. The DXY was rising 0.12% on the day at 106.78 which has since gone parabolic to print a 107.687 in Tokyo’s opening hour.

”With little sign that the US labour market or inflation are slowing sufficiently for the Fed to declare victory on inflation, we have revised up our year-end fed funds rate forecast by 25bp to 4.0%, and now expect three 50bp hikes over the remainder of 2022,” analysts at ANZ Bank said. ”Our 2023 fed funds profile (4.0%) is intact for now, but there is upside risk. We think the Fed will remain steadfast until demand is consistent with target inflation.”

This article was originally published by Fxstreet.com. Read the original article here.