Post #16166

The ECB's Problem Is Worse Than The Fed's. EUR/USD at 1.17, testing the bottom of a well-defined support zone. But with both the Fed and ECB deciding within 24 hours of each other, this support could either confirm or flip to resistance by Friday. Markets are pricing 69bps of ECB hikes by year-end — a dramatic shift from last year's cutting cycle. Eurozone inflation is expected to hit 2.9% in April, the highest since late 2023, entirely driven by the energy shock. That repricing is what's been keeping the euro supported despite deteriorating growth underneath. The other side: the Fed holds Wednesday with rate cuts effectively off the table for 2026. The US economy is outperforming, PMIs are expanding, and the dollar has a yield advantage. If Powell leans hawkish on inflation while the ECB sounds cautious on growth Thursday, the divergence trade reloads and 1.1700 breaks lower. The ECB is trapped between hiking into contraction or letting inflation run. The Fed just has to sit and wait. - Alan