Negative market sentiment continues to dominate as investors remain confident that the Fed will not ease the rate hikes, and the latest US employment data was better than expected. This is why the week began with a decline caused by high volatility, which occurred ahead of this week's release of inflation data in the US. The decrease will intensify if consumer prices increase even a bit.
Earlier, the US was able to slow inflation by selling oil from strategic reserves. However, the resumption of price increases last month is likely to spoil the situation.
There is a high chance that inflation will grow further, if not stabilize at the current level, and provoke another sell-off in the markets. The dynamics of US government bonds also point at this as the yield of 10-year Treasuries almost hit 4% again, rising by 2.44% to 3.980%.
In the wake of increased inflationary pressure, the market will lose all hope that the Fed will slow down the pace of rate hikes. This means that the dollar will rise again and may test the recent local high of the ICE dollar index - 114.05. In this case, expect EUR/USD pair to continue falling to 0.9550. USD/JPY, meanwhile, could reach the 1998 high at 147.50.
A dip in European and US stock indices will also lead to a further rise in dollar.
Forecasts for today:
EUR/USD
The pair is trading above the level of 0.9670. Further negative sentiment will resume the pair's decline, pushing it to 0.9550 before the end of the week.
GBP/USD
The pair is testing the support level of 1.1010. It may end up with a further fall to 1.0900.
