Euro US Dollar Exchange Rate Rockets Upwards in Light of Eurozone PPI Data
The Euro US Dollar (EUR/USD) exchange rate has risen sharply today, following hotter-than-expected Eurozone PPI data.
At the time of writing the EUR/USD exchange rate is trading at around $0.9927 which is about 0.9% up from this morning’s opening rate.
Euro (EUR) Rallies on Better-Than-Expected PPI Data
The Euro (EUR) is strengthening against most of its peers today as the single currency continues to rally in light of positive Eurozone PPI data.
Data published this morning revealed producer prices rose from 4% in July to 5% in August, which printed above forecast it would rise to 4.9%.
This sharp uptick has been largely caused by the increase of energy prices in the Eurozone. It has also set the expectation that the next headline inflation release could report another spike as increased producer prices feed through into consumer prices.
All of this has cheered EUR investors, who will be expecting the European Central Bank (ECB) to aggressively increase interest rates to tackle climbing inflation.
The financial markets are currently pricing in a 75bps hike during the ECB’s next monetary policy meeting after Eurozone inflation surged to a record high of 10% in September.
US Dollar (USD) Dented by Poor PMI Data
The US Dollar (USD) is on the back foot today as the manufacturing PMI results from Monday triggers investor risk appetite.
The manufacturing PMI fell from 52.8 to 50.9 in September. This drop shows that sector growth is slowing, which worried USD investors.
Investors became concerned that the Federal Reserve, who have been vocal about using data to inform monetary policy, would be more restrictive in their next meeting.
This was reflected in trade within the bond market as Jim Reid, a strategist at Deutsche Bank noted:
‘Noticeably, that move lower was entirely driven by a fall in real yields, with inflation breakevens moving higher on [Monday], which is again a sign that investors are pricing in a much less aggressive reaction from the Fed.’
The prospect of a less aggressive interest rate hike and a slowing of economic growth was enough to turn investors away from the ‘Greenback’ and trade in other currencies. Whilst USD has recouped some of its losses from this morning, it remains largely on the back foot.
Euro US Dollar Exchange Rate Forecast: USD to be Boosted by Jobs Data?
The Euro US Dollar exchange rate could be driven by job centric data later today, which could drag on the pairing.
Jobs Openings from the Job Openings and Labour Turnover survey (JOLTs) is expected to fall. From over 11m to 10.7m in August. This could indicate that the jobs market is cooling, which could feed into global recession fear and boost USD.
The Euro will likely move in relation to a speech from ECB President Cristine Lagarde. If she strikes a hawkish tone, Euro could continue to climb in response.
