The euro is showing some bit part resilience on the day as it regains some ground after following other major currencies lower against the dollar earlier. It is now the best performer on the day with a focus on the ECB tomorrow. The technical picture shows a bit more of a consolidation in EUR/USD price action in the past two weeks:

Despite the dollar being firmer today, the euro is the exception as markets continue to aggressively price in ECB rate hikes. As things stand, money markets have priced in odds of 75 bps worth of rate hikes by September as compared to the 70 bps on Friday. Meanwhile, odds of a 50 bps rate hike in July is pretty much a coin flip.

A lot will depend on the ECB language tomorrow to determine how aggressive or justified the market pricing currently is.

I'm on the camp that markets have gone a little too far in pricing ECB hawkishness, especially considering the economic headwinds.

It's a tough one for policymakers when they are getting so little help from lawmakers in the inflation battle but rate hikes aren't the solution. We've known that for a while already and so does Lagarde & co. surely.

Anyway, the euro is pretty much waiting in line for a fresh catalyst to break on either side against the dollar. The ECB might offer some clues tomorrow, so keep your eyes and ears peeled for that.