EUR/USD surrenders 1.0000 as DXY advances ahead of Fed policy

• EUR/USD has slipped below the 1.0000 parity on soaring hawkish Fed bets.
• The DXY has advanced despite Goldman Sachs having posted a bleak growth outlook.
• Further rate hike announcements by the ECB will cause more pain to customers.

The EUR/USD pair has slipped below the magical figure of 1.0000 as the US dollar index (DXY) has advanced amid soaring bets on a bumpers rate hike by the Federal Reserve (Fed). The asset has declined sharply after failing to overstep Friday’s high at 1.0036. The major is expected to remain on the tenterhooks ahead.

DXY’s investors have ignored the trimmed growth forecasts for the US economy, cited by the economists at Goldman Sachs. As per the forecasts, the US economy is expected to deliver a growth of 1.1% in its Gross Domestic Product (GDP) for 2023 vs. the prior consensus of 1.5%. The investment firm has slashed the growth targets due to further tightening of the monetary policy, which will squeeze liquidity from the economy dramatically.

Meanwhile, the market risk profile has turned sour as US President Joe Biden says the US military would defend Taiwan in the event of an invasion by China.

The Fed is most likely announcing a third consecutive rate hike by 75 basis points (bps). The extent of the rate could be stretched further amid a vulnerable response by the inflation rate to the current pace of hiking policy rates.

On the Eurozone front, the shared currency bulls have weakened as European Central Bank (ECB) policymakers have displayed a gloomy growth picture. ECB Chief Economist Philip Lane said on Saturday per Reuters. “At 0.75%, the ECB's deposit rate is still too low as it continues to stimulate the economy, so the ECB's job is not yet done,” He also cited that higher interest rates will accelerate pain for consumers and will squeeze demand further.