Euro US Dollar (EUR/USD) Exchange Rate Wavers amid Elevated Fed Rate Hike Bets
The Euro US Dollar (EUR/USD) exchange rate is fluctuating as the Federal Reserve expected to raise interest rates at least once more. Whereas the Euro is equally supported by rate hike bets.
At time of writing, the EUR/USD exchange rate is around $1.0962, relatively unchanged from this morning’s opening levels.
US Dollar (USD) Supported by Cautious Market Mood
The US Dollar is struggling for a clear direction this morning amid a lack of economic data. However, the ‘Greenback’ remains modestly supported by a hawkish Federal Reserve.
Atlanta Fed President Raphael Bostic commented that the Fed has at least one more interest rate increase before a pause. Stating that inflation remains far too high, Bostic also praised how the economy still has plenty of momentum. Speaking to CNBC, Bostic added:
‘One more move should be enough for us to then take a step back and see how our policy is flowing through the economy. (In order) to understand the extent to which inflation is returning back to our target.
‘By pretty much every measure that you look at, current inflation is more than double what our target is. So there’s still more work to be done and I’m ready to do it.’
Euro (EUR) Propped up by Further Rate Hike Expectations
Meanwhile, the Euro (EUR) also remains relatively quiet amid a thin trading calendar. The market appears cautious to make any drastic moves as it looks for the next catalyst.
European Central Bank Chief Economist Philip Lane is supporting the Euro modestly in the wake of a hawkish speech. Confident of another interest rate at the next policy meeting, Lane was only unsure on the size of the hike. With fears over a banking crisis easing, and energy prices finally falling, Lane claims the ECB can afford another hike to tame sky-high inflation. He added:
‘As of now, two weeks away, I think the baseline is that we should increase interest rates in May but what we do in terms of scale, I’m not going to set a default number.’
Euro US Dollar Exchange Rate Forecast: ECB Speech to Boost the Euro?
Looking ahead, the Euro US Dollar exchange rate could see further fluctuations. A speech from ECB policymaker Isabel Schnabel and Chief Economist Philip Lane could boost the single currency. Any hawkish comments from either could lift the single currency as investors continue to debate over the size of the next ECB interest rate increase.
Meanwhile, the US Dollar could be left to trade on market sentiment until key labour market data tomorrow. Initial jobless claims are expected to tick slightly higher, which could dent the US Dollar as the Fed continues to digest data to aid its next move.
