Even before lectures by the ECB's Draghi and the Fed's Powell, the euro has dropped below the dollar

After recovering from a 19-year low the day before, the euro has fallen against the dollar to 0.9990 as investors become more cautious in the lead-up to the key events. The bloc's economic troubles and the European Central Bank's (ECB) reluctance to increase rates significantly may also weigh on the major currency pair.

The Euro to Dollar exchange rate may have been weighed down by Ursula von der Leyen's gloomy forecasts as well as the recent retreat return in rates and hawkish Fed predictions.

Following a sharp reversal from their mid-June highs, 10-year US Treasury rates have recovered about 3.27 percentage points. Rate hike expectations in September have increased from the previous day's 73% to today's 77%, according to the CME's FedWatch Tool.

But EU President von Der Leyen is pessimistic, as she reported the previous day that half of the EU's aluminum and zinc capacity had been shut down due to the power outage.

On Wednesday, the pair saw its highest one-day increase in 2.5 months, thanks to encouraging news out of the Eurozone and the Federal Reserve's Beige Book. The inconsistent statements made by Fed officials also helped the buyers.

Despite this, Q2 2022 (the three months before June 2022) GDP growth in the Eurozone was 0.8% QoQ, exceeding the initial projection of 0.6% growth. Annual growth was 4.1% in Q2 compared to the 3.9% projected in the first estimations. However, contrary to expectations, the United States' goods and services trade surplus narrowed to $-70.7 billion in July from $-80.9 billion in June. Good trade balance decreased to $91.1B from $-89.1B in July. Pair buyers were also bolstered by the fact that the Fed's Beige Book showed signs of a supply chain recovery and a slowing in price inflation.

On Wednesday, Reuters reported that Fed Vice Chair Lael Brainard said the Fed's policy rate has to raise further and that the Fed will need to maintain a tight monetary policy for some time. Alternatively, Federal Reserve Bank of Cleveland President Loretta Mester said, "I will determine my preferred rate hike amount at the September meeting itself."

As of this writing, S&P 500 Futures are indicating modest losses despite the fact that Wall Street gained at the close of trading and rates fell.

Given the hawkish views of the ECB, Fed Chair Powell will have to justify rapid rate hikes in today's address. Thus, the effectiveness with which Powell can convince investors of future rate hikes will determine the extent to which the EUR/USD pair continues to fall. Prior to that, it will be extremely important to keep an eye on the ECB's ability to calm policy hawks amid ongoing uncertainty over whether or not to make a move of 50 basis points or 75 basis points.