Euro is starting to move up in anticipation of the ECB meeting next month. It rose confidently above 1.0500 because investors believe that there will be a rate hike. But how aggressive can this rate hike be? Many assume that the ECB will remain cautious even after it starts raising rates. They foresee a 0.25% increase in July, which fits into the current paradigm of the central bank. However, inflation continues to soar, and doing nothing to solve it will only exacerbate the situation, especially in the face of geopolitical problems in the EU.
In this regard, consumer inflation in the euro area, which will be published this Friday, will play the most important role. Analysts expect it to increase from 8.1% to 8.3%, which may force the ECB to immediately raise the rate by 0.50%, as the Fed did quite recently. In this case, EUR/USD is likely to break through the existing narrow range of 1.0470-1.0600, go to the recent high of 1.0800, and then move to 1.1170.
Dollar has also been growing noticeably lately and is already overbought. It has already won back all its previous losses, so now it's the turn for euro. As such, it is really likely that the continued growth of inflation in the eurozone, as well as an aggressive rate hike by the ECB, will lead to a strong rally in EUR/USD.
Forecasts for today:
EUR/USD:
The pair is rallying, thanks to growing demand for risky assets and expectations of higher rates from the ECB. A rise above 1.0585 could push the pair towards 1.0655.
AUD/USD:
The pair is currently trading below 0.6960. A consolidation above this level will bring the quote to 0.7050.
