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EUR/USD Downtrend Continues Amid First Bank Takeover, ECB and Fed Rate Hikes

EURUSD Currency Pair Bearish RichDadph

The Euro continues to decline for the third day in a row, remaining around its highest levels since April 2022, as the market awaits the results of the troubled US First Bank’s takeover, as well as the announcements of 0.25% rate hikes from both the European Central Bank (ECB) and the Federal Reserve (Fed). The ECB’s downbeat data and the strong US inflation signals make it harder for the Euro pair buyers. Additionally, fears of the economic slowdown and First Republic woes keep the pair buyers from taking full advantage of the multi-month high. The US ISM PMIs, NFP and First Republic headlines are extra catalysts to watch for clear directions.

The Euro remains pressured for the third consecutive day, dropping towards 1.1000 as the market awaits the results of the troubled First Bank’s takeover, as well as the announcements of 0.25% rate hikes from both the European Central Bank (ECB) and the Federal Reserve (Fed). The downtrend is a SELL signal, indicating that it is not the best time to buy Euro. The downbeat data from the ECB and the strong US inflation signals make it harder for the Euro pair buyers to take full advantage of the multi-month high. Additionally, fears of the economic slowdown and First Republic woes keep the pair buyers away. The US ISM PMIs, NFP and First Republic headlines are extra catalysts to watch for clear directions.


The Federal Deposit Insurance Corporation (FDIC) is calling for bids for the troubled US First Bank after an exodus of withdrawals caused its share price to tank. The results of the takeover are up for release and can give only knee-jerk optimism as an immediate defense of the bank by a private player isn’t a solution to the broad banking problems. On the contrary, the same raises fears of such actions for the larger public banks in the future and hence can keep the risk-off mood intact.

The ECB and Fed are both likely to announce 0.25% rate hikes this week, but signals for future moves are the key. The CME Group FedWatch Tool suggests higher odds of the Fed’s 0.25% rate hike in May and June, as well as a reduction in the market’s bets on the September rate cut from the US central bank. With this, S&P 500 Futures print mild losses even as Wall Street closed positive and the yields eased.

The Eurozone Gross Domestic Product (GDP) for the first quarter (Q1) of 2023 came in mixed for QoQ and YoY. The Eurozone Q1 GDP improved to 0.1% QoQ from 0.0% prior, versus 0.2% expected, whereas the yearly growth eased to 1.3% from 1.4% market forecasts and 1.8% prior. On the same line, Germany’s Q1 GDP improved on a quarterly basis, to 0.0% from -0.4% prior and 0.2% analysts’ estimations, whereas the yearly figures dropped to -0.1% from 0.9% previous readings and 0.3% market forecasts.

Is this a BUY or SELL signal for the currency pair? SELL

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