By Yasin Ebrahim

Investing.com – The euro has suffered a bruising encounter against the dollar, but any hope of a reprieve for the single currency in the first half of the year is unlikely given the “clear and present danger” of rising U.S. interest rates, according to Dutch Bank ING.

The price of $1.1325 was 0.3% less than its previous peak, which is almost 10% lower than the recent peak.

After Isabel Schnabel (European Central Bank member) made hawkish comments on Saturday about the EU’s green energy transition, the bearish outlook is a result of Schnabel’s warning that the ECB might be forced to take action to reduce inflation.

Any uptick in the ECB’s inflation forecast at its upcoming meeting in March could “see expectations build of earlier ECB tightening […] but with “the clear and present danger for tighter [US monetary policy]… we would prefer to back the dollar in 1H22,” ING said.

“[We] favour EUR/USD grinding back towards the 1.1300 area and staying offered into Wednesday’s US CPI release,” the company said.

The Federal Reserve is likely to take aggressive rate hikes in March. These bets will accelerate this week as the U.S. reports its fastest inflation pace since 1982.

“[W]e fully expect the Fed to hike in March, immediately after QE ends—and after three more awful CPI reports—and we think it increasingly likely that the second hike will come before mid-year, in May or June, leaving room for two further increases in the second half of the year,” Pantheon Macroeconomics said in a note.

The inflation report will arrive just a day after Federal Reserve Chair Powell’s his confirmation hearing on Tuesday at 10:00 AM ET before the Senate Banking Committee.

“There is high potential for fresh policy guidance being delivered during his testimony,” Scotiabank said in note.