Although the Fed turned out to be more hawkish than its counterparts, there was general agreement that inflation remained a primary concern across all central banks at this time and that the potential of causing a recession was much lower than the risk of out-of-control wages.
The eurozone has not issued any clarification regarding anti-fragmentation, especially in light of yesterday’s shockingly high Spanish inflation report, which noted the challenging task the European Central Bank faces in balancing soaring peripheral bond spreads and inflation fears.
The markets did not like this strategy, and it even reduced by about 23 basis points the year-end rate hike number that had just been set the day before.
The U.S. core PCE data, which is typically the Fed’s favored gauge of measuring inflation, is to be kept an eye on. Projected numbers are anticipated to be noticeably smaller. Before President Christine Lagarde’s address soon after, a potential slip would give the euro some breathing room.
The euro could undoubtedly lose ground to the dollar if the ECB keeps up its guarded course.