Euro US Dollar (EUR/USD) Exchange Rate Trades Narrowly amid Risk-On Mood
The Euro US Dollar (EUR/USD) exchange rate is trending sideways today. The currency pair is likely seeing its gains limited by a return of risk appetite. Bets on further rate hikes from both the European Central Bank (ECB) and Federal Reserve could also be keeping EUR/USD confined.
At time of writing the EUR/USD exchange rate is at around $1.0174, virtually unchanged from this morning’s opening figures.
Euro (EUR) Drops as Germany Misses Gas Storage Targets
The Euro (EUR) is slipping against its competitors. Continued fears of recession in the Eurozone are likely weighing on the single currency as well as a risk-on market mood.
The trading bloc’s energy supply crisis could be acting as headwinds for EUR today. Reports today indicated that Germany, the trading bloc’s largest member, is unlikely to hit its November target for gas storage.
The news likely added to fears that the country could see drastic energy shortages this winter, potentially pushing the Eurozone closer to a recession. Germany has recently proposed a lower sales tax on gas in attempt to limit additional charges for consumers.
The Euro may be seeing some support from expectations of further interest rate hikes from the ECB, however. Speaking today, ECB board member Isabel Schnabel signalled that the central bank’s inflation outlook had not changed since its previous 0.5% rate hike.
US Dollar (USD) Slips as Investors Pare Back Bets after Cautious FOMC Minutes
The US Dollar (USD) is shedding some of its earlier gains amid a return of risk appetite today. Investors may also be paring back bets after the release of the latest FOMC minutes on Wednesday evening.
The minutes outlined how the central bank might soon consider moving policy tightening to a more ‘restrictive stance’. This has led markets to price in a more cautious 0.5% rate hike at the Fed’s next meeting rather than a 0.75% rise.
Bob Miller, head of Americas Fundamental Fixed Income at BlackRock, argued that the minutes were less dovish than thought:
‘The intended message was much more nuanced” and reflected a need to “optionality” by a central bank trying to assess conflicting economic data and shocks.’
General bets on the Fed’s forward policy of rate hikes may be lending support to USD today, however. Elevated US Treasury bond yields may also be underpinning the currency.
EUR/USD Exchange Rate Forecast: Will German PPI Figures Bolster ECB Rate Hike Bets?
Looking to the week ahead for the Euro (EUR), German PPI figures could boost the single currency if they print unchanged. The index is expected to remain at 0.6% which may increase ECB rate hike bets.
On the other hand, the Eurozone’s energy supply crisis may weigh on the Euro this week. Further developments concerning Germany’s energy supplies could cause further movement in EUR.
For the US Dollar, initial jobless claims figures released later today could sap demand for the currency if they print as forecast. Claims are forecast to rise slightly which markets may see of evidence of a cooling labour market.
Speeches from multiple Fed policymakers on Thursday and Friday could help to underpin USD, however. The speeches could help to strengthen expectations of aggressive action from the central bank.
