Euro US Dollar (EUR/USD) Exchange Rate Sluggish ahead of ECB Address
The Euro US Dollar (EUR/USD) exchange rate is muted this morning as EUR investors await a speech from European Central Bank (ECB) President Christine Lagarde.
At the time of writing the EUR/USD exchange rate is trading at around $0.96527, which is roughly the same as this morning’s opening rate.
Euro (EUR) Pressured as Investors await ECB Speech
The Euro (EUR) is weakening amongst its peers this morning, but trading flat against the US Dollar (USD), as investors await ECB President Christine Lagarde’s speech this afternoon.
Investors expect Lagarde’s speech to be hawkish, following her speech yesterday in which she signalled further aggressive interest rate hikes over the next few ECB meetings in response to higher inflation caused by surging energy prices and the ongoing Russia-Ukraine conflict.
In yesterday’s address Lagarde, said that:
‘As things currently stand, we expect to raise interest rates further over the next several meetings to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.’
However, continued aggressive hikes have some investors and economists concerned about the impact this will have on the Eurozone economy. Yesterday Lagarde tempered her hawkish rhetoric with a warning that economic activity will ‘slow substantially’ in the coming months.
Meanwhile, news of ‘unprecedented’ damage to three offshore lines of the Nord Stream pipeline – the key gas artery from Russia into Europe – have added to concerns about Europe’s energy insecurity. Although the pipeline isn’t currently pumping gas to Europe, news of significant leaks means that any possibility of restarting operations has become even slimmer.
As a result, the Euro is struggling this morning.
US Dollar (USD) Subdued ahead of US Trading Session
The US Dollar (USD) is on the back foot this morning ahead of the North American trading session as risk appetite improves.
Asian markets rose overnight, while today European stocks are also in the green. Markets seem to have calmed somewhat after yesterday’s volatile trade.
However, concerns remain. The recent meltdown in UK markets continues to add to investor anxiety, while worries about rising global interest rates and an escalation in the Russia-Ukraine war also weigh on investors.
As a result, USD’s losses are limited, and it is trying to push higher against a weaker EUR.
Euro US Dollar Exchange Rate Forecast: ECB Speeches to Create Impetus for Exchange Pair?
Looking ahead the Euro US Dollar exchange rate could be driven by speeches from ECB President Lagarde and Vice President Luis de Guindos this afternoon.
Following recent ECB policy tightening, investors are expectant of another sizable hike in October’s policy meeting. As such, investors will be paying close attention to the speeches for any indication of the next interest rate increase. Further hawkish rhetoric could see investors price in a 75bps hike. If, however, the speeches carry a more dovish tone then this could signal a lesser hike. This in turn, could create further headwinds for the currency.
The Euro will also likely be sensitive to any headlines related to the Ukrainian war as the conflict continues.
Later today, US durable goods orders for August are due out. Will a forecast drop of 0.4% dent USD as the US market opens?
