Euro US Dollar Exchange Rate Drops as Hawkish Fed Rhetoric Boosts ‘Greenback’
The Euro US Dollar (EUR/USD) exchange rate is under pressure this morning, after a surprisingly hawkish speech from Federal Reserve Chairman Jerome Powell yesterday evening.
At the time of writing the EUR/USD exchange rate is trading at around $0.9765, which is a roughly down 0.5% from this morning’s opening rate.
US Dollar (USD) Climbs on Powell Comments
The US Dollar (USD) is up against the majority of its peers this morning, following some surprisingly hawkish Federal Reserve comments in the wake of its latest interest rate decision.
On Wednesday the Federal Reserve hiked their interest rates up by 75bps, raising US interest rates to 4%. The hike was already priced into markets, but comments from Powell post hike bolstered demand for the ‘Greenbank’.
Recently, investors had be wary amid rumours the Fed was considering slowing down its pace of policy tightening. However, during the Fed’s press conference Powell appeared to signal the bank will maintain its current trajectory.
‘It is very premature to be thinking about pausing. People when they hear ‘lags’ think about a pause. It is very premature, in my view, to think about or be talking about pausing our rate hikes. We have a ways to go’.
As such, the US Dollar is currently strengthening amid a wave of fresh demand this morning.
Euro (EUR) Mixed as Ukraine Infrastructure Attacks Continue
The Euro (EUR) is trading in a broad range this morning amid the lack of a clear directional bias.
Headlines from Ukraine continue to limit the Eurozone’s upside potential. Russia continues to attack the country’s infrastructure, this time targeting Dnipropetrovsk. The Governor of the region described the ordeal as ‘a tense night of attacks’:
‘Our guys sent another flock of enemy drones to rest. The Russians struck the energy and water infrastructure facilities in Kryvyi Rih. There is serious destruction.’
Despite this, the Euro’s losses were somewhat limited by Valdimir Putin’s decision to restart the export of grain through Ukraine. The Kremlin had previously decided to halt the export of wheat and grain to put further strain of Europe’s infrastructure and the single currency.
Euro US Dollar Exchange Rate Forecast: USD to Loss Gains on Poor Payroll Data?
Turning to tomorrow, the Euro US Dollar exchange rate could climb as US payroll data might dent USD desirability.
US non-farm payrolls are forecast to have fallen from 263K to 200K in October, potentially denting the ‘Greenback’ as this could still dampen appetite within the Fed for another 75bps hike in December.
On the other hand, in the wake of Wednesday’s stronger-than-expected ADP employment figures, we could see an upbeat payrolls print extend the US Dollar’s gains.
Turning to the Euro, European Central Bank (ECB) President Christine Lagarde is due to give a speech tomorrow. EUR investors will be focusing on the speech for any hints on the ECB’s next interest rate decision. Any hawkish comments could see the Euro climb on expectations of aggressive tightening. If, however, Lagarde strikes a more dovish tone, the single currency could face headwinds.
