Euro US Dollar (EUR/USD) Exchange Rate Climbs Despite Risk-On Sentiment
The Euro US Dollar (EUR/USD) exchange rate is firming today. The currency pair is likely being bolstered by higher-than-expected German PPI figures. This in turn may have led to bets on aggressive interest rate hikes from the European Central Bank (ECB).
At time of writing the EUR/USD exchange rate is at around $0.9792, which is up roughly 0.3% from this morning’s opening figures.
Euro (EUR) Gains against USD as German PPI Rises Above Forecasts
The Euro (EUR) is seeing mixed fortunes today despite a retreat in risk appetite. A lingering risk-on sentiment is seeing EUR fall against its riskier rivals. The single currency is making gains elsewhere, however.
EUR is potentially being pushed higher by an above-forecast increase in Germany’s producer price index. September’s reading had been forecast to indicate an increase of 1.3% but printed at 2.3%.
The increase takes producer prices in the trading bloc’s largest member to fresh record highs. The Euro may be finding support today from bets on action from the ECB to combat the inflationary pressures.
A poll published by Reuters on Wednesday found that 75% of economists favored a 0.75% rate hike from the ECB.
Brian Martin at ANZ said:
‘Inflation is far too high. Rapid rate rises are needed. However, the ECB also needs to keep an eye on bond spreads, so more than 75bps seems unlikely.’
On the other hand, EUR is likely coming under pressure today from the Russia-Ukraine conflict. Russian strikes on key infrastructure targets have led to rolling blackouts for some areas of Ukraine.
Additionally, Ukrainian forces are continuing to prepare for a major counteroffensive in the occupied Kherson region.
US Dollar (USD) Muted ahead of Fed Speeches
The US Dollar (USD) is edging lower today despite a paring back in risk appetite overnight. Trading around USD is likely muted ahead of jobless data and Federal Reserve policymaker speeches.
Major losses for the USD may be limited by persistent bets on upcoming bumper interest rate hikes from the Fed.
Recent days have seen speeches from board members James Bullard and Neel Kashkari signalling their support for further hikes.
Speaking on Wednesday, Bullard stated that a 0.75% rate hike from the Fed had been ‘more or less priced into markets’. Bullard also hinted that the central bank would continue to front-load aggressive hikes for the rest of 2022.
EUR/USD Exchange Rate Forecast: Will Drop in Eurozone Confidence add to Recession Fears?
Looking ahead for the Euro, the single currency could drop after consumer confidence figures on Friday. October’s flash reading is forecast to register a negative result for the twelfth consecutive month.
Additionally, further developments in the Russia-Ukraine conflict could also keep pressure on the Euro.
On the other hand, the EU’s attempts to cap gas prices could prompt some positive movement in EUR if they’re successful.
For the US Dollar, an uptick in initial jobless claims later today could weaken the currency. On Thursday and Friday, several speeches from Fed officials could help to limit losses for USD if they echo the central bank’s hawkish stance.
