Euro US Dollar (EUR/USD) Exchange Rate Falls amid Risk-On Mood
The Euro US Dollar (EUR/USD) exchange rate is dropping today. Following the European Central Bank’s (ECB) 0.75% rate hike, speculation that the central bank may now begin to slow its pace of tightening is weighing on the pair.
A strong reading of third quarter US GDP may also be pulling EUR/USD lower today.
At time of writing the EUR/USD exchange rate is at around $1.0030, which is down roughly 0.6% form this morning’s opening figures.
Euro (EUR) Drops Despite 0.75% ECB Rate Hike
The Euro is slipping today despite a bumper interest rate hike from the European Central Bank (ECB). A risk-on market mood is also weighing on the single currency today.
The ECB’s 0.75% interest rate increase was its third consecutive hike, stating that the decision was necessary as ‘inflation remains far too high’. The move provided little positive impetus to EUR however as markets had already largely priced the rate hike in, however.
Speculation that the central could soon begin to slow its pace of policy tightening is the likely cause behind the single currency’s losses following the announcement.
Fears that the rate hike could push the Eurozone closer to a recession may also be keeping pressure on EUR.
The fact that the central bank’s governing council agreed unanimously on the 0.75% rate hike may be lend support to the Euro, however.
US Dollar (USD) Bolstered by Third Quarter GDP Expansion
The US Dollar (USD) is edging higher against many of its rivals today. A risk-on mood is seeing losses against some of the ‘Greenback’s’ riskier rivals, however.
The gains for USD come after the release of today’s third quarter GDP figures. The data saw the US economy rebound by more than expected, curbing fears that the country could be facing a recession.
The figures may also be helping to increase market bets on further interest rate hikes from the Federal Reserve. The stronger GDP print may increase the potential for a soft landing should the Fed continue to raise interest rates.
A rise in jobless claims may also be bolstering Fed rate hike bets today. Claims rose by 3000 in the week ending October 20.
EUR/USD Exchange Rate Forecast: Will German Economy Contraction add to Recession Fears?
Looking to the rest of the week for the Euro (EUR), a speech from ECB President Christine Lagarde could add to the single currency’s upward momentum if she confirms further interest rate hikes.
On Friday, a third quarter contraction in the German economy could pull EUR lower if figures print as forecast. The data may add to fears of a recession in the trading bloc’s largest member, as well as stoking more general Eurozone recession concerns.
On the other hand, a predicted uptick in German inflation could keep the Euro underpinned. The figures could add to speculation of further ECB rate hikes and boost the single currency.
For the US Dollar, a slip in the PCE price index on Friday could dent confidence in USD if figures print as expected. The index is the Fed’s preferred measure of inflation, and a downturn could see the currency slip if investors further pare back rate hike bets. Also on Friday for USD, forecast unchanged personal income and spending figures for September could also weigh on the currency.
