Euro US Dollar (EUR/USD) Exchange Rate Trades Narrowly amid Risk-Off Impulse
The Euro US Dollar (EUR/USD) exchange rate is trending sideways today. Better-than-expected US data releases are likely keeping the currency pair trading within a narrow range. A risk-off impulse may be preventing any drastic slide for EUR/USD, however.
At time of writing the EUR/USD exchange rate is at around $1.0604, virtually unchanged from this morning’s opening figures.
US Dollar (USD) Boosted by Upward Revision n Q3 GDP
The US Dollar (USD) is climbing today after better-than-expected third quarter GDP figures. A risk-off impulse may also be underpinning the safe-haven ‘Greenback’ amid fears of a global economic slowdown.
Third quarter GDP figures were revised higher today as improved consumer spending and business investment saw the US economy expand by more-than-forecast.
A less-than-forecast increase in jobless claims may also be boosting USD today. Reports indicated that US employers are cutting back on hiring rather than laying off employees.
The data pointed to a continually tight labour market, which be prompting bets on further interest rate hikes from the Federal Reserve. The revised GDP figures may also be adding this sentiment surrounding the central bank.
Sam Stovall, chief investment strategist at CFRA Research in New York, said:
‘The GDP data beat a lot of expectations. There are concerns that the economy is not giving up too easily and it’s putting up a fight that will likely require the Fed to remain hawkish and keep interest rates higher for longer.’
Euro (EUR) Firms after Hawkish ECB Comments
The Euro is gaining ground today amid a pullback in global risk appetite. The shift in market mood comes after stronger-than-expected data for the US Dollar (USD).
Hawkish comments from European Central Bank (ECB) officials may also be bolstering EUR today. Multiple policymakers signalled today that further interest rate hikes from the central bank would be necessary.
Speaking in an interview with French newspaper Le Monde published today, ECB Vice-President Luis de Guindos said:
‘We have no choice but to act. Increases of 50 basis points may become the new norm in the near term. If we do nothing, the situation would be worse because inflation is one of the factors behind the current recession.’
On the other hand, the Euro may be seeing its upward movement limited by further developments in the Russia Ukraine conflict. Speaking on Thursday, Russian President Vladimir Putin stated that there was ‘no limit’ on financial support for Russia’s invasion of Ukraine.
EUR/USD Exchange Rate Forecast: Will PCE Slip Prompt Fed Rate Hike Pullback?
Looking ahead to the rest of the week, the US Dollar will see multiple data releases on Friday. A forecast drop in November’s durable goods orders could weigh on USD if the data prints as forecast. The data could be seen as an indication of a downturn in the US manufacturing sector.
An expected slip in the core PCE price index, the Fed’s preferred gauge of inflation, could also push USD lower on Friday. If the data prints as forecast, then it could see markets pare back Fed rate hike bets.
Finally for USD on Friday, the final reading of December’s consumer sentiment could help to stem losses if it confirms an uptick in the index.
For the Euro will see no other significant data releases. The single currency is likely to be affected by any shifts in risk appetite, as well as any developments in the Russia-Ukraine conflict. Market bets on further action from the ECB may also prompt movement in EUR this week.
