Euro US Dollar (EUR/USD) Exchange Rate Climbs as ECB Minutes Signal Further Rate Hikes
(Updated 15:45 25/08/22)
The Euro US Dollar (EUR/USD) exchange rate made ground today, but slipped from its earlier position. The risk-on market mood continued to cap any substantial gains for the currency pair.
Some strong US Data saw EUR/USD drop from its earlier position. US GDP figures fell by less than forecast although still indicated a technical recession for the US economy. Additionally, an uptick to initial jobless claims may have pulled the pair down amid increased bets on Fed interest rate hikes.
The release of the minutes from the European Central Bank’s (ECB) latest meeting may have underpinned the exchange rate, however. The minutes indicated a consensus amongst policymakers that July’s 0.5% rate hike was necessary to tame soaring inflation. Investors also picked up on signals from the minutes that the ECB remained committed to further interest rate hikes.
At time of writing the EUR/USD exchange rate is at around $0.9992, which is up roughly 0.2% from this morning’s opening figures.
Euro US Dollar (EUR/USD) Exchange Rate Recovers amid Risk-On Mood
The Euro US Dollar (EUR/USD) exchange rate is climbing back above parity today. A risk-on impulse amid news of economic stimulus is China may be helping the currency pair to climb today. Additionally, muted bets ahead of Federal Reserve Chair Jerome Powell’s speech on Friday may also be benefitting EUR/USD.
At time of writing the EUR/USD exchange rate is at around $1.0006, which is up roughly 0.4% from this morning’s opening figures.
Euro (EUR) Climbs Against USD as Final GDP Figures Surprise to Upside
The Euro (EUR) is slipping against its competitors today. A risk-on impulse in the markets could be weighing on the single currency. The possibility of a protracted energy crisis in the Eurozone may also be keeping pressure on EUR today.
The single currency has however managed to climb back above parity with the US Dollar (USD) after yesterday’s falls. The final reading of Germany’s GDP growth figures may have pushed EUR higher after they print above forecasts. Second quarter GDP growth came in at 0.1% versus forecasts of 0%.
Additionally, whilst German business confidence fell by less than expected it did little to quell fears of a recession in the trading bloc’s largest member.
Ifo President Clemens Feust said:
‘A bleak mood hangs over the German economy. Uncertainty among the companies remains high, and the German economy as a whole is expected to shrink in the third quarter.’
US Dollar (USD) Drops as Investors Await Powell Speech
The US Dollar (USD) is tumbling against its peers today amid a strong return of risk appetite.
The safe-haven ‘Greenback’ is struggling to attract interest after the announcement that China would be injecting around $146b into its economy. Elevated US Treasury bond yields could be lending some support to USD, however.
The currency may also be seeing muted bets from investors as they await Federal Reserve Chair Jerome Powell’s speech on Friday. Powell is largely expected to confirm the Fed’s schedule of policy tightening.
Hawkish comments from Fed policymakers throughout the week have supported market expectations of further Fed action. Speaking on Wednesday, Fed board member Neel Kashkari stated that it was ‘very clear’ the central bank would need to continue hiking rates.
EUR/USD Exchange Rate Forecast: Will US GDP Figures Push Country into Technical Recession?
Looking to the remainder if the week for the Euro, the latest monetary policy meeting accounts from the ECB could help to bolster the single currency later today. Investors will be looking for signs that the central bank will push ahead with its schedule of interest rate hikes.
On Friday, a predicted slip in consumer confidence could prompt further losses in EUR if figures print as forecast.
For the US Dollar, GDP growth figures later today could see the currency slump if they print as forecast. The US economy is predicted to have contracted in the year’s second quarter which would indicate a technical recession.
Also today, initial jobless claims figures could see investors pare back Fed rate hike bets if they tick higher as predicted.
Friday’s reading of the core PCE price index, the Fed’s preferred method of inflation, could also see losses for the currency. The forecast slip in the index may lead to markets pricing in less aggressive action from the central bank.
Finally on Friday, a speech by Fed Chair Jerome Powell delivered from the Jackson Hole symposium could boost USD. Powell is expected to reaffirm the central bank’s commitment to further interest rate hikes.