Euro US Dollar (EUR/USD) Exchange Rate Fluctuates amid Cautious Market

Euro US Dollar (EUR/USD) Exchange Rate Wavers as Prevailing Risk-Off Mood Takes Hold

The Euro US Dollar (EUR/USD) exchange rate is fluctuating today as hawkish stances by both central banks capped gains for the major.

At time of writing, the EUR/USD exchange rate is around $1.0686, a moderate drop overnight.

Euro (EUR) is Struggling to Regather Strength amid Lack of Data

The Euro (EUR) is unable to find a clear direction today despite the continued hawkish stance from the European Central Bank (ECB). Governing Council Member Klaas Knot suggested yesterday that inflation expectations were stable and a 50bps hike in still on the table for July.

The ongoing Ukraine conflict still weighs heavy on the Euro. EUR investors fear energy prices will rise further as the EU continues to pursue its ban on Russian oil imports.

European Commission President Ursula von der Leyen is hopeful that an agreement could be found ahead of next week’s EU leaders’ summit.

However, with Hungary reluctant to sign up to the deal, a failure to would be a crushing blow to the bloc’s credibility and a major economic boost for Vladimir Putin, who relies on fossil fuel exports to help finance his invasion of Ukraine.

Elsewhere the Euro also faces headwinds because of Brexit tensions amidst the risk of a costly EU-UK trade war if the UK government pushes ahead with plans to unilaterally alter the Northern Ireland protocol.

US Dollar (USD) Zigzags Despite Hawkish FOMC Minutes

The US Dollar is failing to find its footing this morning despite the release of the hawkish Federal Open Market Committee (FOMC) minutes last night.

The minutes revealed unanimous support for a jumbo rate hike announcement. Another 50bps is expected at the Fed’s June and July meetings.

Subduing any further gains for the ‘Greenback’ came as the minutes also revealed a more cautious outlook from September, and a subsequent slowdown in rate increases.

If a more restrictive policy stance is brought into play, depending on the economic outlook, such a move could hamper the US Dollar going forward.

Euro US Dollar Exchange Rate Forecast: US Data to Weigh on the Euro?

With no major data for the Euro to lean on, all eyes will be on the release of the latest US GDP figures later today. A potential boost to the Euro could be seen with GDP expected to be unchanged at -1.3% in the first quarter of 2022. A significant contraction compared to the 6.9% growth seen in Q4 2021.

Further influencing the pairing could be the initial jobless claims for the US, where a predicted 215k Americans have filed new claims for unemployment benefits, down 3k from the previous month. A drop in new unemployment claims could provide a boost for the US Dollar.

Danny Tingle

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